Saturday, December 24, 2016

week ending Dec 24

Back to normal? -- A year ago, the Federal Reserve decided to raise its target for the fed funds rate by 25 basis points above the floor of 0-0.25% at which we’d been stuck for 7 years. FOMC members indicated at the time that they were expecting to end 2016 at 1.4%, or four rate hikes during the last year. We started this December at 0.41%, and the first hike of 2016 didn’t come until last week. Now FOMC members say they are expecting to end 2017 at 1.4%, or three more hikes from here during the next year. The January 2018 fed funds futures contract is currently priced at 1.23%, suggesting that the market is buying into two, not three hikes during 2017. The Fed has a long-run goal of seeing the inflation rate around 2%. In earlier decades, the big challenge was how to keep inflation from rising well above that target. But over the last 8 years, inflation has been coming in persistently below 2%, suggesting the Fed had room to try to stimulate the economy more without having undesirable consequences for inflation. During the last year inflation has been climbing but still remains well below 2%. Expectations of future inflation implicit in the price of Treasury Inflation Protected Securities have also been stubbornly below 2%, though these too have moved up over the last year. Yield on 5-year nominal U.S. Treasury securities minus those on TIPS, daily Dec 17, 2011 to Dec 15, 2016. Source: FRED. But the big question is whether there is still so much slack in the economy that more stimulus is called for. The unemployment rate fell to 4.6% in November, which brings it below the Congressional Budget Office’s current assessment that the long-run natural unemployment rate for the U.S. is 4.8%. The long period when the Fed looked in frustration at the unemployment rate as something it wanted to bring down may now be over.

US central bank decision to raise interest rates doesn’t make much sense - Bill Mitchell -- On December 14, 2016, the US Federal Reserve Bank pushed up its policy target interest rate from 0.5 per cent to 0.75 per cent. In its – Press Release – it said that the “labor market has continued to strengthen and that economic activity has been expanding at a moderate pace since mid-year”. It acknowledged that “business investment has remained soft”. But it believes that even though it has increased the rate by 25 basis points, there is still room for “some further strengthening in labor market conditions and a return to 2 percent inflation”. The logic is very confused in my view. First, the US labour market is weak (in inflation pressure terms) notwithstanding the reduced official unemployment rate. Real wages growth has been effectively zero and the broad measure of labour underutilisation (U6) remains at 9.3 per cent (as at November). Second, the emphasis on central bank policy shifts is based on a view that elements of total spending are sensitive to interest rate changes and by increasing rates, price pressures will attenuated. The only problem with that logic is that all the elements of spending in the US (private investment, household durable goods) are hardly setting the world on fire. Private investment, in particular, is in poor shape. So by the US Federal Reserve bank’s own logic (which I do not share) it should be expecting on-going further poor investment growth, which will further undermine potential productive capacity. Not a sound strategy at all.

Global Debt, Equity Markets Lose $1 Trillion In Value As Hawkish Fed Spooks Traders - Thanks to Janet Yellen's rate-hike-hawkishness (but, but, but, we're still ultra-easy), global equity and debt markets lost over $1 trillion in value - the biggest weekly loss since early May (weak China data and huge surge in dollar). Global bonds lost over $430 billion in market value this week (Yellen hawkishness and China bond carnage) but stocks lost even more ($525 billion) as China financial turmoil added to the world's woes (and "three rate hikes next year" and fiscal stimulus efficacy questions did not help). Having retraced back to pre-Trump levels before The Fed statement this week, the combination of China turmoil and Janet's un-dovishness sent global stocks and bonds down over $1 trillion on the week - the worst week globally since May 2016 (when the dollar surged amid China weakness and slowing EU growth forecasts). In fact, while US bank stockholders are ebullient at The Trump presidency-to-be, the rest of the world has lost a combined $1.5 trillion in market value across its bonds and stocks (thanks in major part to Janet's help this week).

The Trump Shock and Global Interest Rates – Beckworth - One more quick note on the Trump shock and interest rates. For some time I have been following the global safe asset shortage problem and how it has created a downward march of safe assets interest rates. This can be seen in the figure below: The latest development in this story is that the safe asset interest rates have all started heading up, as seen in the above figure. Even Japan's which is supposed to be targeted at 0 percent but has climbed to 0.8 percent. Now these yields have a long ways to go before reaching normal levels and they started rising before Trump's election. But since the election the ascension of these interest rates has accelerated in many cases. This is a bit puzzling. It is one thing to think the Trump shock has changed the growth and inflation outlook in the United States so that treasury yields are now going up, but why the other advanced economies?As you may recall, the safe asset shortage story says there has been a price floor (ceiling) on safe asset interest rates (bond prices) that has kept the market for safe assets from properly clearing. (See this pre-2008 figure and post-2008 figure for a graphical representation of this story.) The shortage was a big deal because these securities functioned as transaction assets for institutional investors. The shortage, therefore, amounted to an effective shortage of money that was evident in the below trend growth of broad monetary aggregates that measure both retail and institutional money assets. There were there three solution paths that could solve this problem: increase the supply of safe assets, decrease the demand for safe assets by improving the economic outlook, or do negative interest rates. These three paths are depicted below: The Trump shock seems to be working through the first two options for U.S. treasuries. First, the Trump infrastructure plans and tax cuts imply larger budget deficits. Second, the spending and supply-side reforms suggest an improved economic outlook that is decreasing demand for treasury securities. This story, though, only explains the U.S. situation.

A Computer Can’t Do the Fed’s Job – Kashkari - After extraordinary actions by the Federal Reserve during and following the Great Recession, including quantitative easing programs and record low interest rates, some economists are calling for the Federal Open Market Committee to mechanically follow a simple rule in conducting monetary policy. As a regional Fed bank president and member of the FOMC, I believe this would unduly limit the Fed’s policy tools and ultimately harm the economy and in turn employment. The idea is to effectively turn monetary policy over to a computer, rather than continue to let Fed policy makers use their best judgment to consider a wide range of data and economic trends. The classic example of such a rule is the one proposed by Stanford economist John Taylor more than 20 years ago. The “Taylor rule,” as it’s widely known, calculates a desired level for the federal-funds rate based on measures of inflation and economic output.My staff at the Minneapolis Fed has estimated that if the FOMC had followed the Taylor rule over the past five years, 2.5 million more Americans would be out of work today. Why would the Taylor rule have caused so much harm to so many Americans? Because the rule would have called for much higher interest rates during this period than was appropriate. For example, last week the FOMC raised the federal-funds rate by a quarter percentage point to between 0.50% and 0.75%. The Taylor rule would call for an increase to 3%. Advocates of rigid rules-based monetary policy are pursuing laudable goals that I share. In theory, stringently following simple rules has the potential to reduce policy uncertainty and unnecessary market volatility, increase the Federal Reserve’s credibility in pursuing its dual mandate and reduce potential vulnerability to political pressure. But to gain these benefits, the FOMC would need to specify the rule and then—this is the most important part—stick to it, regardless of economic conditions. If the FOMC were to make exceptions, even rarely and with good intentions, most of the benefits of mechanically following a rule would be lost. Uncertainty and volatility would return as soon as discretion re-entered the equation. Unfortunately, sticking to such a rule no matter how the economy evolves can be very damaging.

Energy Inflation Is Increasing and May Place the Fed in a Policy Bind Next year -- Energy Inflation is increasing: Saudi Arabia's massive production cut in 2014 sent oil prices lower, causing a large economic boost to consumer spending. Earlier this month, OPEC reversed course, signing a deal that cut production. This was the primary reason for the latest rally in the oil market. According to Bloomberg, bullish oil bets are currently at a 2-year high. All of these factors will cause an increase in energy inflation, which may place the Fed in a policy bind. Overall CPI is hovering around 2%: core is 2.1% while overall is 1.7%. But as the chart above shows, energy prices are starting to accelerate, which will push overall CPI closer to the Fed's 2% target.

PCE Price Index, Headline and Core, Little to No Change in November - The BEA's Personal Income and Outlays report for November was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index rose 0.04% month-over-month (MoM) and is up 1.37% year-over-year (YoY). The latest Core PCE index (less Food and Energy) came in at 0.0% MoM and 1.65% YoY. Core PCE remains below the Fed's 2% target rate. The adjacent thumbnail gives us a close-up of the trend in YoY Core PCE since January 2012. The first string of red data points highlights the 12 consecutive months when Core PCE hovered in a narrow range around its interim low. The second string highlights the lower range from late 2014 through 2015. Core PCE has been higher in 2016. The first chart below shows the monthly year-over-year change in the personal consumption expenditures (PCE) price index since 2000. Also included is an overlay of the Core PCE (less Food and Energy) price index, which is Fed's preferred indicator for gauging inflation. The two percent benchmark is the Fed's conventional target for core inflation. However, the December 2012 FOMC meeting raised the inflation ceiling to 2.5% for the next year or two while their accommodative measures (low FFR and quantitative easing) are in place. More recent FOMC statements now refer only to the two percent target.

Appreciate the Disaggregated Dollar -- The broad dollar is now up well over 20 percent since the end of 2012. The vast bulk of the move occurred in the last two and a half years. The dollar has essentially reversed its 2006 to 2013 period of sustained dollar (tied to the weakness of the U.S. economy, the size of the U.S. trade deficit, and the Fed’s willingness to act to ease U.S. monetary conditions at a time when the ECB was stubbornly resistant to monetary easing). And in some sense we have already seen some of the results play out.

U.S. export growth has slowed (though U.S. import growth has remained fairly subdued, particularly in 2016—moderating the impact of net trade on output)

China decided that it couldn’t continue to manage its currency primarily against the dollar, but only after (essentially) following the dollar up in 2014. The transition though to a basket peg—if that is what managing with reference to a basket means—hasn’t been clean. After the 2014 appreciation, it seems China wanted to use the transition to a new regime to bring the yuan down a bit against the basket. One big question is whether China thinks the 10 percent depreciation against the basket that it carried out over the past year and a half is enough.

Many, but not all, oil exporters that maintained heavily managed currencies against the dollar let their currencies depreciate. Saudi Arabia is of course the most important exception.

And—illustrating the impact of the reserves that were accumulated by most emerging economies over the last decade plus—the big dollar appreciation has yet to trigger a major emerging market default. Brazil and Russia have both weathered large depreciations and recessions without default.

One particularity of the United States is that two of its closest trading partners—Canada and Mexico—are both major oil producers and large exporters of manufactures. The value of both the Mexican peso and the Canadian dollar both really matter for U.S. trade, and both are to a degree influenced by the price of oil. The following graph, prepared by Cole Frank of the Council on Foreign Relations, disaggregates the contribution of different currencies to the move in the trade-weighted (nominal) dollar.

Interest rate spike says slowdown not downturn -- for now: The biggest economic story since the US Presidential election has been the backup in long term interest rates. Post-Brexit in July they hit some all-time lows, with the 10 year Treasury yielding as low as 1.36%. At one point last week they yielded as high as 2.64%. Does this portend recession? Not yet I think. What has been remarkable is how similar the spike in yields has been to the "taper tantrum" of 2013. Here's a look at 10 year Treasuries (red) vs. 30 year mortgage rates (blue) since the beginning of 2009: Note that while the correlation between the 2 interest rates isn't perfect, it is pretty darn close. Further, interest rates as of now are much closer to their highs since the recession than their lows. Hence my rating of them as negatives in my Weekly Indicators columns. So next, let's compare mortgage rates with single family housing permits. I am choosing this housing metric because it is much less noisy than others while being very leading. Here's what we see since the recession (Note: I've inverted rates so that higher rates show as lower and visa versa, to more easily show the correlation): Pay particular attention to the late 2013-2014 period that followed the taper tantrum. The increasing trend in housing permits came to a nearly complete halt -- but did not turn down, thanks in large part to demographics, as the large Millennial generation has been entering the market. For the record, when we take this relationship back half a century, we see that typically in the 1970s and 1980s interest rates had to increase by 2%, or even 2.5% or more, before there was an outright downturn in housing (again interest rates are inverted). The taper tantrum is my template now. If interest rates do not exceed the 3.04% yield they set as a high then, most likely the back-up in yields just portends a slowdown. If they exceed 3.46%, it is much more likely that they portend a downturn in housing -- and a subsequent downturn in the economy as a whole. We're not there yet.

Chicago Fed: Economic Growth Decreased Slightly in November - "Index shows economic growth decreased slightly in November." This is the headline for today's release of the Chicago Fed's National Activity Index, and here are the opening paragraphs from the report: Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to −0.27 in November from −0.05 in October. Two of the four broad categories of indicators that make up the index decreased from October, and two of the four categories made negative contributions to the index in November. [Link to News Release] The previous month's CFNAI was revised upward from -0.08 to -0.05. The Chicago Fed's National Activity Index (CFNAI) is a monthly indicator designed to gauge overall economic activity and related inflationary pressure. It is a composite of 85 monthly indicators as explained in this background PDF file on the Chicago Fed's website. The index is constructed so a zero value for the index indicates that the national economy is expanding at its historical trend rate of growth. Negative values indicate below-average growth, and positive values indicate above-average growth. The first chart below shows the recent behavior of the index since 2007. The red dots show the indicator itself, which is quite noisy, together with the 3-month moving average (CFNAI-MA3), which is more useful as an indicator of the actual trend for coincident economic activity.

Q3 GDP Revised Up to 3.5% Annual Rate --From the BEA: Gross Domestic Product: Third Quarter 2016 (Third Estimate) Real gross domestic product increased at an annual rate of 3.5 percent in the third quarter of 2016, according to the "third" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.4 percent. The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 3.2 percent. With this third estimate for the third quarter, nonresidential fixed investment, personal consumption expenditures (PCE), and state and local government spending increased more than previously estimated, but the general picture of economic growth remains the same ... Here is a Comparison of Third and Second Estimates. PCE growth was revised up from 2.8% to 3.0%. (solid PCE). This was above the consensus forecast.

Q3 GDP Third Estimate: Another Upward Revision to 3.5% - The Third Estimate for Q3 GDP, to one decimal, came in at 3.5% (3.52% to two decimal places), an upward revision from the 3.2% second estimate and a substantial increase over the 1.4% Third Estimate of Q2 GDP. The latest number exceeded mainstream estimates. Investing.com had consensus of 3.3%. Here is the slightly abbreviated opening text from the Bureau of Economic Analysis news release: Real gross domestic product increased at an annual rate of 3.5 percent in the third quarter of 2016, according to the "third" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.4 percent. The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 3.2 percent. With this third estimate for the third quarter, nonresidential fixed investment, personal consumption expenditures (PCE), and state and local government spending increased more than previously estimated, but the general picture of economic growth remains the same (see "Updates to GDP" on page 2). The increase in real GDP in the third quarter primarily reflected positive contributions from PCE, exports, private inventory investment, nonresidential fixed investment, and federal government spending that were partly offset by negative contributions from residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased. The acceleration in real GDP in the third quarter primarily reflected an upturn in private inventory investment, an acceleration in exports, a smaller decrease in state and local government spending, an upturn in federal government spending, and a smaller decrease in residential investment, that were partly offset by a smaller increase in PCE and an acceleration in imports. [Full Release] Here is a look at Quarterly GDP since Q2 1947. Prior to 1947, GDP was calculated annually. To be more precise, the chart shows is the annualized% change from the preceding quarter in Real (inflation-adjusted) Gross Domestic Product. We've also included recessions, which are determined by the National Bureau of Economic Research (NBER). Also illustrated are the 3.23% average (arithmetic mean) and the 10-year moving average, currently at 1.40%.

Third Estimate 3Q2016 GDP Revised Upward. Corporate Profits Up.: The third estimate of third quarter 2016 Real Gross Domestic Product (GDP) was revised upward to 3.5 %. This improvement was mainly due to upward revision to intellectual property products and personal consumption expenditures for services (see table below). Analyst Opinion of GDP It seems GDP keeps getting better. Personal consumption is now stronger and in the normal range historically since the Great Recession. I have been a doubter on GDP improvement continuing into the 4th quarter, but this was a relatively strong quarter.Headline GDP is calculated by annualizing one quarter's data against the previous quarters data (and the previous quarter was relatively strong in this instance). A better method would be to look at growth compared to the same quarter one year ago. For 3Q2016, the year-over-year growth is 1.7 % - moderately up from 2Q2016's 1.3 % year-over-year growth. So one might say that the rate of GDP growth accelerated 0.4 % from the previous quarter. The same report also provides Gross Domestic Income which in theory should equal Gross Domestic Product. Some have argued the discrepancy is due to misclassification of capital gains as ordinary income - but whatever the reason, there are differences. This third estimate released today is based on more complete source data than were available for the "second" estimate issued last month. (See caveats below.) Real GDP is inflation adjusted and annualized - the economy was statistically unchanged on a per capita basis. The table below compares the previous quarter estimate of GDP (Table 1.1.2) with the current estimate this quarter which shows:

Q3 GDP Revised To 3.5% On Higher Consumer, Government Spending; Financial Profits Surge - In the third and final estimate of Q3 GDP, the BEA reported that real gross domestic product increased 3.5% in the third quarter of 2016, above the 3.3% expected . The growth rate was 0.3% higher than the “second” estimate released in November, when it printed 3.2%, and well above the first estimate of 2.9% from two months ago. The revised growth estimate, the fastest in two years, reflected updated figures on research and development expenses from companies, spending by nonprofit institutions and use of financial services. The upward revision to third-quarter GDP growth reflected upward revisions to business investment, to consumer spending, and to state and local government spending. In the second quarter, real GDP rose 1.4%. However, the economy is unlikely to sustain such a pace in the final three months of the year, when it is expected to slow down to 2.2% SAAR, according to the median estimate. On a year over year basis, GDP grew 1.7%. The increase in real GDP partly reflected an increase in consumer spending on services, notably on housing and utilities. Consumer spending on durable goods also increased, notably on motor vehicles and parts. However, spending on nondurable goods declined. Overall, Personal Consumption Expenditures contributed 2.03% of the bottom line annualized GDP print, up from 1.9% last quarter. As a result, spending, which account for almost 70 percent of the economy, grew at a 3% annualized rate, stronger than the 2.8% pace previously estimated, and was driven largely by increased spending on services.. While the spike in personal consumption will be a welcome sign, it begs the question how much was pulled forward from the Q4 GDP print, which is expected to slow down notably to around 2.0%. Exports of goods increased, notably in foods, feeds, and beverages and in consumer durable goods. Exports of services increased, mainly in travel. In addition, private inventory investment and federal government spending increased. Net trade contributed a total of 0.85% in the third quarter. Offsetting these contributions to growth, investment in equipment and in residential housing declined. Fixed investment was revised just fractionally higher, printing at 0.02% thus ending the series of 3 consecutive quarters of negative prints. Corporate spending on equipment decreased at a 4.5% annualized pace in the third quarter, compared with the 4.8% drag previously estimated, and subtracted 0.3 percentage point from growth, the report showed. Final sales to domestic purchasers increased at a 2.1% rate, compared with the prior estimate of a 1.7% pace. Corporate profits increased 5.8% at a quarterly rate in the third quarter after decreasing 0.6% in the second quarter. Profits of domestic nonfinancial corporations increased 5.7 percent after decreasing 4.6 percent. The biggest contributor to the growh was profits of domestic financial corporations which soared 11.3 percent after rising 1.3 percent. Profits from the rest of the world were nearly unchanged after increasing 10.3 percent. Over the last 4 quarters, corporate profits increased 2.1 percent.

Q3 Real GDP Per Capita: 2.65% Versus the 3.52% Headline Real GDP - The Third Estimate for Q3 GDP came in at 3.52%, up from 1.4% in the Third Estimate of Q2 GDP. With a per-capita adjustment, the headline number is lower at 2.65%. Here is a chart of real GDP per capita growth since 1960. For this analysis we've chained in today's dollar for the inflation adjustment. The per-capita calculation is based on quarterly aggregates of mid-month population estimates by the Bureau of Economic Analysis, which date from 1959 (hence our 1960 starting date for this chart, even though quarterly GDP has is available since 1947). The population data is available in the FRED series POPTHM. The logarithmic vertical axis ensures that the highlighted contractions have the same relative scale. The chart includes an exponential regression through the data using the Excel GROWTH function to give us a sense of the historical trend. The regression illustrates the fact that the trend since the Great Recession has a visibly lower slope than long-term trend. In fact, the current GDP per-capita is 10.0% below the pre-recession trend. The real per-capita series gives us a better understanding of the depth and duration of GDP contractions. As we can see, since our 1960 starting point, the recession that began in December 2007 is associated with a deeper trough than previous contractions, which perhaps justifies its nickname as the Great Recession. The standard measure of GDP in the US is expressed as the compounded annual rate of change from one quarter to the next. The current real GDP is 3.52%. But with a per-capita adjustment, the data series is lower at 2.65%. The 10-year moving average illustrates that US economic growth has slowed dramatically since the last recession.

Mr. Trump will Inherit a Robust Economy (4 graphs) The BEA presented an early gift to the incoming administration with the final estimate of Q3 GDP growth, revised from 3.2% to 3.5%, the highest growth rate since Q3 of 2014. The strong GDP growth combined with an unemployment rate of 4.4% justifies the Fed’s December interest rate boost. The increase in real GDP in the third quarter was led by contributions from PCE (contributing 2.0 percentage point, see Table 2 in the link above), exports (1.6p.p.), private inventory investment (0.49p.p.), nonresidential structures (0.3p.p.), and federal government spending (0.16p.p.). Residential fixed investment was a drag on growth, falling for the second consecutive quarter, down 7.7% in Q2 and down 4.1% in Q3. The U.S economy will continue to grow through the fourth quarter although it is unclear what impact the Trump election will have on Fourth Quarter results. Wholesale changes in trade policies, or merely expectations of changes in trade policy could begin impacting GDP as early as the next report. There is some reason for pessimism on this score because Mr. Trump’s election has already pushed the dollar to new highs – currently nearly at par with the Euro. This will hurt U.S. exports in the long run. And it may run counter to what Mr. Trump promised if the U.S. loses jobs in the Export industries. Markets are pricing in a substantial gain in GDP and corporate profits on the basis of what is know so far and the yield curve has steepened significantly. But housing remains weak in the Fourth quarter so far and higher interest rates are not going to help that. The unfortunate fact is that the smoke really hasn’t cleared on Trump’s goals. It remains to be seen whether this optimism is warranted just as it remains to be seen what Mr. Trump’s policies actually turn out to be

Conference Board Leading Economic Index: "Flat in November" - The Latest Conference Board Leading Economic Index (LEI) for November was unchanged at 124.6, but September and October were both revised upward by 0.1 percent. The latest indicator value came in below the month-over-month 0.2 percent increase forecast by Investing.com.The Conference Board LEI for the U.S. was flat in November with positive contributions from seven out of its ten underlying components, negating declines from building permits, average weekly manufacturing hours and the ISM® new orders index. In the six-month period ending November 2016, the leading economic index increased 1.0 percent (about a 2.0 percent annual rate), after declining 0.2 percent (about -0.5 percent annual rate) during the previous six months. In addition, the strengths among the leading indicators have recently become more widespread. [Full notes in PDF] Here is a log-scale chart of the LEI series with documented recessions as identified by the NBER. The use of a log scale gives us a better sense of the relative sizes of peaks and troughs than a more conventional linear scale.

US Q4 GDP Growth Estimates Remain Subdued -- The outlook for US growth in the fourth quarter is still muted vs. Q3’s pace, according to recent updates from various sources. The strong 3.2% increase in Q3 is expected to decelerate to around 2% and hold at that pace in Q1 2017, picking up slightly as the new year unfolds. The Wall Street Journal’s new survey data for this month shows that the average Q4 forecast inched up to 2.3%, slightly above last month’s 2.1% estimate. Even so, the current estimate is still well below the 3.2% rise in Q3—a two-year high. Last week’s nowcast from the New York Fed is especially weak, anticipating Q4 growth of just 1.8%. Weighing on the bank’s Dec. 16 estimate: weak projections for industrial activity in the final quarter of this year. By contrast, the Atlanta Fed’s Dec. 16 nowcast is relatively upbeat. The bank’s GDPNow model is projecting Q4 growth at 2.6%. Does 2017 look any better in the wake of Donald Trump’s election last month? That’s the general assumption. Media reports advise that the next occupant of the White House will roll out new policies (lower taxes, lighter regulation, and infrastructure spending) that’s designed to boost economic growth. Such plans appear to have lifted the public’s expectations, according to a new Gallup survey. Americans’ confidence in the economy continues to gradually strengthen after last month’s post-election surge. Gallup’s U.S. Economic Confidence Index averaged +10 for the week ending Dec. 18, marking another new high in its nine-year trend. Economists, however, remain cautious. As CNBC reported earlier this month: Business economists expect the U.S. economy to pick up speed next year, but not as quickly as Donald Trump promised during the election campaign. In their latest economic outlook, forecasters surveyed by the National Association for Business Economics said they expect the U.S. gross domestic product to end 2016 with an average annual growth rate of just 1.6 percent, before strengthening next year to a 2.2 percent annual growth rate.

Not All Measures of GDP are Created Equal - Dave Giles - A big hat-tip to one of my former grad. students, Ryan MacDonald at Statistics Canada, for bringing to my attention a really informative C.D. Howe Institute Working Paper by Philip Cross (former Chief Economic Analyst at Statistics Canada). The paper is titled, "What do the Different Measures of GDP Tell us?"We all know what's meant by Gross Domestic Product (GDP), don't we? O.K., but do you know that there are lots of different ways of calculating GDP, including the six that Philip discusses in detail in his paper, namely:

GDP by industry

GDP by expenditure

GDP by income

The quantity equation

GDP by input/output

GDP by factor input

So why does this matter? Well, for one thing - and this is one of the major themes of Philip's paper - how we view (and compute) GDP has important implications for policy-making. And, it's important to be aware that different ways of measuring GDP can result in different numbers. Here's my take-away (p.18 of the paper): "For statisticians, the different measures of GDP act as an internal check on their conceptual and empirical consistency. For economists, the different optics for viewing economic activity lead to a more profound understanding of the process of economic growth. Good analysis and policy prescription often depend on finding the right optic to understand a particular problem."

They're Back: Foreign Central Banks Quietly Unleash A Treasury Buying Spree - According to the most recent TIC data, reported here last week, foreign Treasury holders and especially China, were dumping US paper like there's no tomorrow. In fact, according to the latest available data as of the end of October, foreign central banks had liquidated a record $403 billion in Treasuries in the LTM period. However, it is what happened after this date that is more interesting, and while we won't have official TIC data for December until mid-February, a convenient proxy for foreign central bank Treasury activity is the Fed's custody account, where according to the latest data as of December 21, there has been a substantial swing in purchasing intentions. As shown in the chart below, after a year and a half of one-way selling, the Treasury holdings in the Fed's custody account have jumped by $60 billion in the past month... ... leading to one of the most acute sell-to-buy swings since the start of 2015, when just like now, conventional wisdom was to dump Treasuries, only to result in a dramatic plunge in yields to the mid-1% range. So with foreigners once again aggressively buying US paper, does it mean that the recent rout is over? We don't know the answer, although as we reported two days ago, someone believes they do, and are aggressively loading up on calls for TLT (the long-end Treasury Bond ETF) which as we showed is the most active with call volumes (bullish bonds, lower rates) more than double the average, with over $1.3 billion notional in February $126 Calls (which will payoff if rates drop to around 2.00% by then).

Interest payments could become one of the federal govt's biggest line items - Uncle Sam is about to get hit with higher interest payments. Much higher. And those higher costs will force the government to raise taxes, cut spending or borrow more to make up the shortfall. That warning comes from a new report by the Committee for a Responsible Budget, following last week's move by the Federal Reserve to begin raising interest rates, a major turning point that signals a historical reversal of a long-term decline in the cost of borrowing. Rising interest rates help savers and hurt borrowers. As the biggest borrower on the planet, the U.S. government will soon begin paying more to investors holding roughly $14 trillion in Treasury debt. Over the next 10 years, those interest payments are projected to become one of the biggest line items in the federal budget. "As debt continues to grow and interest rates return toward more normal levels, interest spending is slated to be the fastest growing part of the budget," the budget watchdog group warned in its report. The group also cautioned that interest payments could rise even more quickly if the incoming Trump administration follows through with campaign promises to cut taxes and increase spending on infrastructure, which the group estimates would cost $6 trillion over a decade. Borrowing to fund those programs would raise both the amount of debt and the interest cost on each new dollar, because the issuance of that much new debt would tend to push interest rates even higher, the group said. That estimated $6 trillion in new spending would boost interest costs by $2.5 trillion over a decade, including over $450 billion in 2026 alone. Even without new spending, the cost of servicing the national debt is expected to nearly triple over the next 10 years, according to estimates by the Congressional Budget Office. That's more than twice as fast as the growth of spending on Social Security or Medicare.

Has Academic Thinking About Countercyclical Fiscal Policy Changed? – Brad DeLong - Has academic thinking about countercyclical fiscal policy changed recently? I would not say that thinking has changed. I would say that there is a good chance that thinking is changing–that academia is swinging back to a recognition that monetary policy cannot do the stabilization policy by itself, at least not under current circumstances. But it may not be. If things are swinging back, it is as a result of a whole bunch of extraordinary surprises. Back in 2007 we thought we understood the macroeconomic world, at least in its broad outlines and essentials. It has become very clear to us since 2007 that that is not the case. Right now we have a large number of competing diagnoses about where we were most wrong. We clearly were very wrong about the abilities of major money center banks to manage their derivatives books, or even to understand to understand what their derivatives books were. We clearly did not fully understand how those markets should be properly regulated. Right now, however:

We have people who think the key flaw in the world economy today is an extraordinary shortage of safe assets. Nobody trusts private sector enterprises to do the risk transformation properly. Probably people will not again trust private sector enterprises for at least a generation.

We have those who think the problem is an excessive debt load where–I think we should distinguish between debt for which there is nothing safer, the debt of sovereigns that possess exorbitant privilege, and all other debts.

We have those who think we are undergoing a necessary deleveraging.

We have those who look for causes in the demography.

And then there is Larry Summers, as the third coming of British turn-of-the 20th century economist John Hobson. (The second coming was Alvin Hansen in the 1930s.) And the question: just what is Larry talking about?

Will Fiscal Policy Really Be Expansionary? - Paul Krugman -- It’s now generally accepted that Trumpism will finally involve the kind of fiscal stimulus progressive economists have been pleading for ever since the financial crisis. After all, Republicans are deeply worried about budget deficits when a Democrat is in the White House, but suddenly become fiscal doves when in control. And there really is no question that the deficit will go up. But will this actually amount to fiscal stimulus? Right now it looks as if Republicans are going to ram through their whole agenda, including an end to Obamacare, privatizing Medicare and block-granting Medicaid, sharp cuts to food stamps, and so on. These are spending cuts, which will reduce the disposable income of lower- and middle-class Americans even as tax cuts raise the income of the wealthy. Given the sharp distributional changes, looking just at the budget deficit may be a poor guide to the macroeconomic impact. Given the extent to which things are in flux, I can’t put numbers on what’s likely to happen. But I was able to find matching analyses by the good folks at Center on Budget and Policy Priorities of tax * and spending ** cuts in Paul Ryan’s 2014 budget, which may be a useful model of things to come. If you leave out the magic asterisks — closing of unspecified tax loopholes — that budget was a deficit-hiker: $5.7 trillion in tax cuts over 10 years, versus $5 trillion in spending cuts. [...] Taking all this into account, that old Ryan plan would almost surely have been contractionary, not expansionary. Will Trumponomics be any different? It would matter if there really were a large infrastructure push, but that’s becoming ever less plausible. There will be big tax cuts at the top, but as I said, the push to dismantle the safety net definitely seems to be on. Put it all together, and it’s extremely doubtful whether we’re talking about net fiscal stimulus.

Goldman: The Yellen Fed Will Offset Trump’s Fiscal Stimulus, Threatening Stock Market Rally - Because the Fed believes we're at or near full employment, any potential fiscal stimulus will serve to boost inflation more than growth, according to Goldman. As such, they believe both credit and FX markets have read this correctly, but stock investors, the village idiots, haven't quite grasped what this could entail. Goldman believes the Yellen Fed will explicitly work against Trump's fiscal stimulus in order to keep the inflation boogeyman in check. This means Yellen might raise rates more than expected, switching from the Fed put to the Yellen call, limiting the upside of the stock market -- which is inherently an easing factor in monetary policy. This implies that any new tailwind for U.S. activity — say, from a massive fiscal stimulus — would end up boosting inflation more than growth as it would force the economy to rub up against its supply-side constraints. Economic output can only grow as much as the labor and capital available to produce it — and an aging U.S. population places a demographic damper on available man-hours of work. "So far, the [currency] and bond markets appear to have the firmer grip on this reality," write the Goldman pair. The main market impacts of fiscal stimulus will be higher inflation and real interest rates, which are positive for the U.S. dollar but not necessarily so for risk assets, they argue. This argument is further reinforced by Federal Reserve Chair Janet Yellen's apparent hawkish lurch in her press conference last week, in which she said the labor market was "in the vicinity of full employment" and threw cold water on the idea that she wants to see the economy run hot. For the supply side, Trump's policies are a mixed bag, per Goldman: capping immigration reduces potential growth, while deregulation and tax reform that helps spur investment could increase the U.S. economy's top speed. The Fed, in other words, might be ready to tighten policy to serve as a monetary offset to any fiscal expansion. For equity markets, the potential for a swifter pace of rate hikes from the central bank in the face of meaningful fiscal expansion constitutes a "contingent knock-in" trigger for the "Yellen call," or Goldman's theory that rallies in stock prices would elicit more tightening from the Fed Chair that would limit further upside.

Trump’s pick for budget director has urged big spending cuts (AP) — Republican Rep. Mick Mulvaney, President-elect Donald Trump's choice as his budget director, is a fierce deficit hawk with a record of pushing deep spending cuts across the federal government to balance the budget. The 49-year-old from South Carolina, just re-elected to a fourth term, is a co-founder of the hard-right House Freedom Caucus that pushed former Speaker John Boehner, R-Ohio, from power. As director of the White House Office of Management and Budget, Mulvaney would be responsible for Trump's budget submissions to Congress. Those budgets are likely to address Trump's campaign promises to repeal the Affordable Care Act, cut taxes broadly and boost spending on public works and other projects. If confirmed by the Senate, Mulvaney would lead an office that coordinates federal regulations, putting him in charge of repeals of Obama administration rules. Trump has been critical of several of President Barack Obama's executive orders, from those involving climate change and reining in Wall Street to protecting the children of immigrants who are in the United States illegally. Strongly anti-establishment, Mulvaney has supported cuts beyond what House Republican leaders preferred and has refused to back deals to raise the government's borrowing limit, more recently causing heartburn for current Speaker Paul Ryan, R-Wis. The nomination probably will soothe fiscal conservatives but could put Mulvaney at odds with Trump, who has pledged additional spending for transportation, military and veterans' health care without offering little details on how to pay for it. Trump has previously suggested that the government should take on new debt for many of the spending projects because interest rates are so low.

Trump Summons Contractors to Mar-a-Lago Over Spending -- The two largest U.S. defense contractors said Wednesday they would seek to control their costs after President-elect Donald Trump summoned them and a bevy of top Pentagon officials to his Mar-a-Lago resort in Florida to discuss military spending. “We’re trying to get costs down, costs,” Trump told reporters in brief remarks outside the resort after the officers departed. “Primarily the F-35. That program is very, very expensive.” Trump has employed his Twitter account and its nearly 18 million followers as a weapon against defense contractors, using it to criticize the expense of Boeing Co.’s planned update of Air Force One and Lockheed Martin Corp.’s $379 billion F-35 Joint Strike Fighter, the most expensive U.S. weapon system ever. Boeing Chief Executive Officer Dennis Muilenburg said he told Trump the planemaker can build a new version of the presidential aircraft for less than $4 billion. “We’re going to get it done for less than that, and we’re committed to working together to make sure that happens,” Muilenburg told reporters as he left the Florida resort. The $4 billion price tag for the plane program is a number Trump used in a tweet and well exceeds the Pentagon’s estimated cost. Lockheed CEO Marillyn Hewson didn’t announce any new commitments to Trump, while signaling the company has been making progress in lowering costs. “I appreciated the opportunity to discuss the importance of the F-35 program and the progress we’ve made in bringing the costs down,” she said in a statement after her meeting. “The F-35 is a critical program to our national security and I conveyed our continued commitment to delivering an affordable aircraft to our U.S. military and our allies.”

Bad News for America’s Workers - Joseph E. Stiglitz – As US President-elect Donald Trump fills his cabinet, what have we learned about the likely direction and impact of his administration’s economic policy? To be sure, enormous uncertainties remain. As in many other areas, Trump’s promises and statements on economic policy have been inconsistent. While he routinely accuses others of lying, many of his economic assertions and promises – indeed, his entire view of governance – seem worthy of Nazi Germany’s “big lie” propagandists. Trump will take charge of an economy on a strongly upward trend, with third-quarter GDP growing at an impressive annual rate of 3.2% and unemployment at 4.6% in November. By contrast, when President Barack Obama took over in 2009, he inherited from George W. Bush an economy sinking into a deep recession. And, like Bush, Trump is yet another Republican president who will assume office despite losing the popular vote, only to pretend that he has a mandate to undertake extremist policies. The only way Trump will square his promises of higher infrastructure and defense spending with large tax cuts and deficit reduction is a heavy dose of what used to be called voodoo economics. Decades of “cutting the fat” in government has left little to cut: federal government employment as a percentage of the population is lower today than it was in the era of small government under President Ronald Reagan some 30 years ago. With so many former military officers serving in Trump’s cabinet or as advisers, even as Trump cozies up to Russian President Vladimir Putin and anchors an informal alliance of dictators and authoritarians around the world, it is likely that the US will spend more money on weapons that don’t work to use against enemies that don’t exist. If Trump’s health secretary succeeds in undoing the careful balancing act that underlies Obamacare, either costs will rise or services will deteriorate – most likely both.

Trump’s Economic Plan is a Betrayal of the People Who Voted for Him - Trump’s economic plan has sent stocks ripping higher for six weeks straight. But what’s going to happen to stock prices when Congress gives Trump’s plan a big thumbs down? Has anyone thought about that yet? And what about the Fed? Does anyone seriously think that Fed chairman Janet Yellen is going to sit on her hands while Trump launches a $1 trillion fiscal stimulus package that triggers a sudden burst of growth followed by a sharp uptick in inflation? No, Yellen’s not going to sit on her hands. She’s going to raise rates to prevent the economy from overheating which is going to throw cold water on Trump’s pro-growth government-spending plan. And if the plan doesn’t survive in its current form, then stocks are going to retrace all the gains they’ve made in the last month and a half. That’s roughly 1,700 points erased in the blink of an eye. Bottom line: Trump’s Santa Rally could turn into a stock market bloodbath unless he’s able to deliver on his promises, which doesn’t look very likely. Check this out from Bloomberg:“President-elect Donald Trump’s race to enact the biggest tax cuts since the 1980s went under a caution flag Monday as Senate Majority Leader Mitch McConnell warned he considers current levels of U.S. debt “dangerous” and said he wants any tax overhaul to avoid adding to the deficit.“I think this level of national debt is dangerous and unacceptable,” McConnell said, adding he hopes Congress doesn’t lose sight of that when it acts next year. “My preference on tax reform is that it be revenue neutral,” he said…The deficit-crazed Republicans are just as committed to austerity as ever, mainly because slashing government spending coupled with low interest rates is a tried-and-true method of transferring obscene amounts of money to the 1 percenters. Why would they tinker with a mechanism that works perfectly already? They won’t, at least not to the extent that it’ll have any meaningful impact on the living standards of millions of working people across America. Congress is going to prevent that at all cost. And so will the Fed. Just listen to what Yellen had to say to a journalist from the Washington Post last week following the FOMC meeting. She was asked point-blank whether she thought the economy needed more fiscal stimulus or not. Her answer: “Well … I called for fiscal stimulus when the unemployment rate was substantially higher than it is now. So with a 4.6 percent unemployment, and a solid labor market, there may be some additional slack in labor markets, but I would judge that the degree of slack has diminished, So I would say at this point that fiscal policy is not obviously needed to help us get back to full employment … But nevertheless, let me be careful that I am not trying to provide advice to the new administration or to Congress as to what is the appropriate stance of policy.” Nice, eh? Yellen threatens Trump with three more rate hikes in 2017, torpedoes his $1 trillion infrastructure plan with a wave of the hand, and then has the audacity to deny that she’s dictating policy.

Progressives Need to Promote Deficit Spending Before Trump Makes It His Baby - J.D. Alt - I’d like to propose that it is important, right now, for existing progressive political leaders to stake out positions in support of direct sovereign spending for the creation of collective goods. If they must, they can call it “deficit spending.” What is important is that they very aggressively get on the record as proposing and supporting federal spending programs to to address specific issues that Americans are struggling with. If this does not happen, there is a real risk that the newly empowered right-wing government of the Trump administration will propose to increase “deficit spending” first. If that were to happen, the progressive cause will have a serious dilemma: Do they push back against Trump―decrying the dangers of increasing the national debt!―or do they get aboard his spending train as more-or-less unnecessary baggage, and watch as it puffs and whistles its way into the hearts of the American heartland? I make this suggestion because it seems fairly certain that the last eight years of conservative insistence on fiscal austerity and federal debt reduction have been primarily driven by a political strategy to prevent the Obama administration from accomplishing anything of substance that could endear it to voters. The fact that Obama, himself, aided and abetted the substantial success of this strategy―by publicly agreeing the U.S. “debt” was unsustainable, and embarking on high-profile negotiations to rein in the “federal deficit”―underlies the enormous danger America’s progressive cause now faces. With Obama (and the Clinton legacy touting its budget “surplus”) now gone, the opportunity exists for progressives to forcefully reverse the political mistake. But there is not much time. Even though the fiscal-austerity position was a political ploy, it is still very much stuck in the thinking and rhetoric of the House and Senate Republicans. If the progressives come out first, and early―before Trump has an opportunity to reframe their allegiance―the Tea-Party politicians, who built their reputations by refusing to increase the federal debt ceiling, will have no choice but to, once again, loudly denounce and denigrate the spending proposals. If that happens, it will be much more difficult for Trump to initiate the secret weapon of every authoritarian populist government around the world: giving direct cash payments, stipends, and rebates to the unemployed and under-employed voters―transforming them into vehemently loyal supporters.

Nice Things – Atrios - We're sort of reaching the breaking point of the decades long battle between the party that promises to kick those other people, and the party that promises not to kick them quite so hard. I think there have been some signs of Dems recognizing it, but they're still largely locked into that way of thinking. ACA, for all its benefits, just couldn't be implemented without making it fucking hard for people. That the subsidies aren't generous enough makes it too expensive for people, and that's a problem, but it's one thing to be forced to buy a car you can't really afford, another to buy a car that you can't afford that you have to take in for repairs every other week. The government can't just provide the nice things it once provided because reasons. Hell, once upon a time they built community pools and golf courses. Now your HOA might have a pool.We're the richest damn country in the history of the world (close enough, anyway). Life shouldn't be so hard. Not against The Data, but the data doesn't really capture what's going on for "the middle class." It isn't that wages are stagnant or shrinking - though that's an issue too! - It's that doing the right thing and having a tiny bit of luck is no longer enough to achieve economic security anymore. Life's a crap shoot from 18-67 (soon to be longer, if Republicans get their way). We're all one medium sized economic hit (including medical) away from the downward spiral. And thanks to that glorious bankruptcy bill, once you get into a hole you're probably trapped there. Bipartisany goodness to make David Broder swoon. 74-25 in the Senate, 302-126 in the House. But the Dems are the good guys! Yah, well, not enough of them and not consistently enough. Vote for Dems and the share of them voting for horrible things will shrink slightly! And it isn't complicated. Thinking that it is complicated is the problem. There are better and worse ways to achieve things, and the wonks can fight it out, but the point is to achieve them. And, really, given how small the nice things budget is who cares?

Does Paul Krugman Really Want to Say Hillary Could Have Won Only by Keeping the Truth from Voters? – Ed Dolan - Paul Krugman says the election was hacked. He thinksHillary Clinton would have won the presidency, but for two problems: I’m talking about the obvious effect of two factors on voting: the steady drumbeat of Russia-contrived leaks about Democrats, and only Democrats, and the dramatic, totally unjustified last-minute intervention by the F.B.I. . . Does anyone really doubt that these factors moved swing-state ballots by at least 1 percent? If they did, they made the difference in Michigan, Wisconsin and Pennsylvania — and therefore handed Mr. Trump the election, even though he received almost three million fewer total votes. Yes, the election was hacked. I’m not sure Krugman has any hard statistical evidence to back this up, but he may very well be right. Is so, what is the implication? Krugman wants us to focus on the fact that the people who did the hacking were “bad guys.” In my view, though, we should not allow the fact that “bad guys did it” to distract our focus from one key fact: What we learned from the Russian hackers and the FBI was true. Yes, Clinton really did have a private email server. At a minimum, by her own admission, that showed bad judgement. Yes, the DNC, as revealed by Wikileaks, really did put its thumb on the scale in the primaries. Without the DNC’s covert aid—or with a more timely revelation of that aid—a fairer primary process might well have resulted in the nomination of Bernie Sanders. Yes, Clinton’s paid speeches to banks really did contain material that could have swayed undecided primary voters, had it come out earlier in the year — her embrace of free trade and open borders, her offer to give Wall Street executives a larger role in crafting regulations, her casual willingness to say one thing behind closed doors and another in public. None of this was false news. It was true news. So here is my question: When Krugman says that Clinton would have won the presidency of only the election had not been hacked, isn’t that exactly the same as to say that she could have won only if she had been able to keep the truth safely under wraps?

Donald Trump Completes Final Lap, Electoral College, to White House --In the House chamber, where the electors met, the vote was greeted with a standing ovation by citizens and Republican officials who had come to witness the event. Outside, perhaps 100 protesters waved placards and chanted “Save our democracy” in a vain effort to persuade electors to reject the Republican nominee. Normally a political footnote, the electoral vote acquired an unexpected element of drama this winter after Mr. Trump’s upset of Hillary Clinton, who received 2.86 million more popular votes but won in states that totaled only 232 electoral votes. The states Mr. Trump won held 306 electoral votes. His electoral victory spawned a determined effort to block his path to the presidency by grass-roots advocates who saw him as unfit for the White House and by some who saw him as a threat to the political system. Presidential electors — and particularly Republican electors, who are bound by tradition and often state law to support Mr. Trump — were inundated with phone calls, emails and even threats demanding that they vote for someone else. Leaders of groups that were lobbying the electors had privately believed they had a chance to persuade enough Republican electors to defect, denying him an Electoral College majority and throwing the election to the House of Representatives. But by late Monday, only a handful of electors had broken ranks. A full vote tracker is here. While Mr. Trump’s opponents needed 37 Republican defectors to bring his electoral-vote tally below 270, the bulk of electors who broke ranks — four in Washington State — were Democrats who otherwise would have voted for Ms. Clinton. Instead, they voted for the former Republican secretary of state Colin L. Powell and Faith Spotted Eagle, a Native American tribal leader who has led opposition to the Keystone XL pipeline.

Challenge #1: Any policy problem difficult enough to make it to the president’s desk is usually multidimensional.

Challenge #2: The work of government is often highly interconnected. What one department does affects another.

Challenge #3: Once you get past the analysis, most presidential decisions involve tradeoffs among competing values and interests. I believe those judgment calls should be made by the person selected by voters.

Let’s construct an imaginary example of what appears to be a straightforward, even simple, policy question, and then use that to understand how policy advice to a president typically works. Suppose House & Senate Republicans are moving a bill to increase government infrastructure spending by $200 B over the next decade, fully offset by cuts to other government spending. Let’s pretend Senator Ron Wyden, senior Democrat on the Senate Finance Committee, proposes doubling that new spending to $400 B over ten years with the increment to be offset by a roughly ten cent per gallon tax increase on gasoline and diesel fuel. Suppose Senate Minority Leader Chuck Schumer has told White House Chief of Staff Reince Priebus that he wants to talk to President Trump about this proposal. Finally, suppose President Trump decides he wants advice on how to respond to Senator Schumer. Thus the question is: How should President Trump respond to Congressional Democrats’ proposal to double the proposed government infrastructure spending increase to $400 B, offset by a tax increase of roughly ten cents per gallon on gas and diesel fuel? Pretty straightforward, right? Let’s unpack the question the way a White House policy council staff would.

The International Barriers to Trump’s Economic Plan - Mohamed El-Erian – US President-elect Donald Trump should have a relatively clear road ahead at home for the implementation of his economic program: with Republicans holding majorities in both houses of Congress, he seems likely to benefit from a break in the political gridlock that has paralyzed the body for the last six years. But the United States economy does not exist in a vacuum. If Trump is to succeed in delivering the high growth and genuine financial stability that he has promised, he will need some help from abroad. Trump has established infrastructure investment, tax reform, and deregulation as central components of his strategy to boost the US economy’s actual and potential growth. Confident that his plan can unfold as intended, he has set ambitious targets, including GDP growth approaching 4% per year. For now, investors seem to be pretty much sold. Under the assumption that the incoming Trump administration will ultimately refrain from triggering a trade war, they moved fast to price in optimistic prospects for higher real growth, higher inflation, and more money entering the financial markets. This has enabled the US Federal Reserve to begin to normalize its monetary-policy stance; in addition to a 25-basis-point interest-rate hike on December 14, the Fed has indicated that the pace of such hikes will accelerate in 2017. The expectation that Trump will have better luck on this front has produced a textbook asset-price response. Stock prices have climbed, led by financials and industrials; interest rates on US government bonds have risen, both on a standalone basis and relative to those in other advanced economies; and the dollar has surged to levels not seen since 2003. Here is where the rest of the world comes in. Other major economies – namely, in Europe and Asia – may have a much harder time than the US rebalancing their policy mix (which continues to be characterized by excessively loose monetary policy, inadequate structural reforms, and, in some cases, excessively tight fiscal policy). But if they do not, the Fed’s continued interest-rate hikes would stimulate investors to trade their German and Japanese bonds, in particular – which are now bringing low and even negative returns – for higher-yielding US varieties. The resultant wave of capital flows into the US would push up the value of the dollar even further.

The Trade Deal Crusaders: Can They Never Learn? - One certain outcome of the 2016 election is that the Trans-Pacific Partnership (TPP) is dead, for the moment. The qualification is necessary because the proponents of the TPP and similar trade pacts refuse to accept that the country is not interested in further trade agreements along the same lines as past pacts. Rather than accepting the reality that these trade deals really are unpopular, they seem to believe that they really just face a marketing problem. With a better jingle or a few witty phrases, the public will suddenly be anxious to buy the trade deals they are trying to sell.Viewing the unpopularity of failed trade deals as being a problem of messaging is a denial of reality that deserves the name Trumpian. In the last 15 years, millions of workers have lost jobs due to imports and tens of millions have seen weaker wage growth -- this is not a problem that will go away with better messaging. Deals like the TPP are unlikely to substantially worsen the jobs situation, but this is only because most of the trade barriers with most potential trading partners are already low. For better or worse, there is not another China out there, which can potentially displace millions of manufacturing workers with low-cost exports. This doesn't mean that we may not still lose more jobs due to trade, but we are unlikely to ever again see anything like the mass displacement of the years 2000-2008.Since trade barriers are already low, the TPP and other "trade" deals are not really about free trade, they are about setting up a business friendly structure of regulation. While a few representatives of labor unions and consumer groups got to sit on the working groups that provide input on drafts of the TPP, according to a Washington Post analysis, 85 percent of the members came from business groups. The TPP and other next generation trade deals are also about putting in place stronger and longer patent and copyright protections (yes, that is "protections" as in "protectionism," the opposite of free trade). The proponents of these trade deals continue to argue, almost as a holy cause, that we have to move forward with their agenda or something bad will happen.

Is Donald Trump’s Trade Talk Confusing on Purpose? - During the presidential campaign, Donald Trump threatened across-the-board tariffs on Mexico and China. He also warned he would “break” the North American Free Trade Agreement. But since he has been elected, he has largely shelved that rhetoric and focused instead on convincing some high-profile companies not to send jobs abroad. His trade advisers have been mostly quiet. What to make of this? Some investors and trade experts say the uncertainty about Mr. Trump’s trade plans could give him leverage. Trading partners may fear the U.S. really would engage in trade war if it doesn’t get its way—but also may have some hope that a Trump administration would be open to a reasonable deal. “The question is to what extent the new administration is really going to increase protectionism, and to what extend the threat of increasing protectionism is a means to negotiate a new bilateral trade agreement,” . Mr. Zacks points out the U.S. is less dependent on exports than other major economies, so—in theory at least—could endure a trade disruption better than most of its big trading partners. When it comes to China, Mr. Trump has “now created an opportunity for a new style of engagement that’s very different from how both the Obama administration and the Bush administration were dealing with China, which may be a good thing,” said Chad Bown, senior fellow at the Peterson Institute for International Economics, a Washington think tank that backs freer trade. Perhaps. But others in Washington worry that Mr. Trump could overplay his hand and push too hard. For instance, Chinese officials reacted heatedly when the president-elect linked the delicate strategic issue of Taiwan relations to efforts to deal with China on trade. For the moment, markets don’t seem too worried about a trade war. The Dow Jones Industrial Average—chock-full of multinationals and importers that would suffer under big tariffs—is up 9.1% since Nov. 7. (On the other hand, U.S. Steel Corp. has jumped 77%, an indication investors expect the industry to be protected from foreign rivals.)

Trump Appoints "Death By China" Author Peter Navarro To Head Trade Office, Hints At Beijing Trade War --Another day, another shot across the bow from Donald Trump aimed squarely at China. Having already participated (and in the case of one, precipitated) two mini diplomatic snafus with Beijing, Trump is sending a clear message to Beijing that US-China trade under his administration will be anything but business as usual, by creating a National Trade Council inside the White House to oversee industrial policy and has decided to appoint a hard core China hawk to run it. According to the FT, which broke the news, Trump has chosen Peter Navarro, a Harvard-trained economist, to head the NTC. The author of books such as "Death by China" and "Crouching Tiger: What China’s Militarism Means for the World" has for years warned that the US is engaged in an economic war with China and should adopt a more aggressive stance — a message that the president-elect sold to voters across the US during his campaign. Speaking to the American public, Trump said “I read one of Peter’s books on America’s trade problems years ago and was impressed by the clarity of his arguments and thoroughness of his research,” Trump said. “He has presciently documented the harms inflicted by globalism on American workers, and laid out a path forward to restore our middle class.” Fast forward to today, when Trump has made it clear that at least when it comes to the Chinese trade relationship, the president elect will engage in a wholesale overhaul of the legacy relationship. More details from the FT:

Trade Policy with China -Menzie Chinn - Since President-elect Trump has nominated Peter Navarro* to direct the newly formed Trade Policy Council, now seems a good time to review some trade data. An inspection of the US-China trade balance would seem to highlight the need for some action, especially after comparing the US-China bilateral balance to the aggregate. However, it’s of interest to note that up until now, the deficits as shares of GDP have been relatively stable since the end of the Great Recession, with the overall balance shrinking as a share of GDP. The US-China (goods) deficit is some 60% of the total (goods and services) deficit as of October 2016. However, it’s important to recall that that the bilateral trade balance records the exports and imports from the last source location; hence a $100 widget imported from China, but incorporating $40 components from Malaysia and $50 components from Taiwan, and $10 of Chinese labor, would be counted as $100 worth of imports from China. The value added imported from China (the economically interesting variable) would only be $10 in this example, but $100 of imports is recorded. In other words, the calculation does not take into account the development of global supply chains. Johnson and Noguera (2013: 93) show that when accounting for trade in intermediates, the 2004 US-China trade deficit of approximately $125 billion is reduced by $35-$50 billion (30-40% reduction). Now, it’s likely that the domestic component of Chinese exports have risen over time. Nonetheless, it’s still likely true that the bilateral deficit in value added is less than that in gross goods. It’s also likely that the impact on the trade balance of any restrictive measures on imports will be swamped by the impending dollar appreciation (and associated emerging market downturns).

China "Shocked" By Navarro Appointment, As Trump Team Proposes 10% Import Tariff -- As the FT first reported yesterday, in a dramatic development for Sino-US relations, Trump picked Peter Navarro, a Harvard-trained economist and one-time daytrader, to head the National Trade Council, an organization within the White House to oversee industrial policy and promote manufacturing. Navarro, a hardcore China hawk, is the author of books such as "Death by China" and "Crouching Tiger: What China’s Militarism Means for the World" has for years warned that the US is engaged in an economic war with China and should adopt a more aggressive stance, a message that the president-elect sold to voters across the US during his campaign. In the aftermath of Navarro's appointment, many were curious to see what China's reaction would be, and according to the FT, Beijin's response has been nothing short of "shocked." To wit:The appointment of Peter Navarro, a campaign adviser, to a formal White House post shocked Chinese officials and scholars who had hoped that Mr Trump would tone down his anti-Beijing rhetoric after assuming office.“Chinese officials had hoped that, as a businessman, Trump would be open to negotiating deals,” said Zhu Ning, a finance professor at Tsinghua University in Beijing. “But they have been surprised by his decision to appoint such a hawk to a key post.”Shortly after the announcement of Navarro's appointment, the US Office of the Trade Representative yesterday put added more fuel to trade tensions with China when it put Alibaba, China’s biggest e-commerce platform, back on its “notorious markets” blacklist of companies accused of being involved in peddling fake goods. Cui Fan at the China Society of WTO Studies, a think-tank affiliated with China’s commerce ministry, warned that Beijing would respond to any unilateral action by the incoming Trump administration. “China is preparing itself for US trade actions,” he said. “China will respond with counteractions of its own.” China has found itself on the receiving end of diplomatic chaos for much of the past three weeks, starting with Trump accepting a congratulatory phone call from Taiwan president Tsai Ing-wen in early December, which defied almost four decades of precedent. It only escalated from there, and culminated with the confiscation of a US marine drone last week, which however, China promptly returned to the US earlier this week.

A 10% Across-the-Board Tariff? - Menzie Chinn - Today the idea of a 10% across-the-board tariff rate increase was mooted. As Noland et al. (2016), pp.9-10 observe, the President has authority to undertake such measures. However, as a member of the WTO, other members have a right to dispute. More likely, they’ll retaliate. A quick observation — retaliation need not occur in the trade sphere. Even setting aside retaliation in the political dimension, ample possibilities arise in the economic sphere. Let me focus on China, since it has been a key target of the incoming administration [1]. Suppose tariffs go up by 10%; that effect on import prices can be nullified by a 10% depreciation of trading partner exchange rates. I’ve been thinking about other ways in which retaliation could occur. In the past, I’ve said it was unlikely that China would unload its stockpile of Treasurys, because it would be self-defeating from China’ perspective as it would have resulted in a large capital loss for the PBoC. Now, however, the PBoC could more aggressively support the value of the RMB by selling Treasurys at a faster pace. To the extent that this maintains the value of the RMB, this might be to the Trump Administration’s liking (even if the higher interest rate on Treasury yields would be unwelcome). But because the Chinese maintain a panoply of capital controls, in principle the Chinese could let the RMB depreciate and sell Treasurys by loosening those capital controls. Of course, the success along each dimension (decumulating Treasurys, depreciating the yuan) depends on the pressure on the external balances. However, if President-elect Trump’s agenda of large tax cuts is implemented, and accompanied by lots of policy uncertainty (I think we can bank on that last point), then the pressure will likely persist. Do recall, however, that a 10% tariff combined with a 10% dollar appreciation means net zero impact on the relative import prices, but a 10% worsening of export competitiveness.

Donald Trump’s trade team has based their analysis on a remarkably silly mistake - Donald Trump gives every indication of wanting to govern like a conventional conservative Republican on the vast majority of domestic issues. One big potential exception is trade, where he campaigned in an unorthodox manner and is setting the stage for a shake-up of how federal trade policy is normally conducted. One part of that is Trump has stated his intention to make Commerce Secretary (and billionaire investor) Wilbur Ross the lead authority on trade negotiations. The other is that he is tapping University of California economist Peter Navarro for a brand new White House job, heading up something Trump is calling the National Trade Council. This makes sense, since Ross and Navarro were the co-authors of an important policy paper the Trump campaign put out during the election season that mostly focused on trade issues. Unfortunately, the paper’s discussion of trade was incredibly shoddy. George Mason University’s Scott Sumner describes as “a complete mess,” which, if anything, is too kind. When Adam Davidson profiled Navarro for the New Yorker, he wrote that even when he asked Navarro to help him out, he couldn’t find a single other economist who fully agreed with him on trade and China. Which is about what you would expect, since the Ross/Navarro trade policy analysis is based on a mistake that would get you flunked out of an AP economics class. “When net exports are negative,” Ross and Navarro write, “that is, when a country runs a trade deficit by importing more than it exports, this subtracts from growth.”They believe that, therefore, we can boost growth by curtailing imports: […] Reading this, you might wonder why it is that in the real world, economists actually do try to develop complex computer models of the economy. The answer is that the alternative method Ross and Navarro are proposing doesn’t even remotely work. Here’s a quick way to tell that something has gone wrong with the Ross/Navarro argument. Last year, the United States imported $180 billion worth of petroleum products — oil and such. According to Ross and Navarro, if the United States made it illegal to import oil, thus wiping $180 billion off the trade deficit, our GDP would rise by $180 billion. With labor constituting 44 percent of GDP, that would mean about $80 billion worth of higher wages for American workers. So why doesn’t Congress take this simple, easy step to boost growth and create jobs? Well, because it’s ridiculous.

What would be Trump’s biggest mistake - As John Pilger describes in his new documentary The Coming War on China, the "threat of China" is becoming big news. The media is beating the drums of war, as the world is being primed to regard China as the new enemy. What is not news, is that China itself is under threat. A quick look at the map of the American military bases in Asia-Pacific, is adequate for someone to understand that they form a giant noose, encircling China with missiles, bombers, warships. It is quite clear that the Western plutocracy is changing the agenda because it sees that the Sino-Russian alliance is trying to build an independent bloc which could become a serious threat against the dollar domination, and therefore, the neoliberal model, through which the elites are hoping to establish their global supremacy. Donald Trump, is a big question mark, especially concerning the US foreign policy. First of all, we must not forget that Trump is part of the US plutocracy, therefore, he will seek to defend the interests of his class, no matter how much the Right-Wing fanatics want to present him as an 'anti-establishment' figure. You don't need to go too far on this. Just take a look at those who has appointed in key positions to run the economy and you will understand that Trump will not only do 'business as usual', but indeed, he will seek to secure the domination of the plutocracy, by expanding the destructive neoliberal agenda against the interests of the US working class. Forget for a moment that the Chinese continuously upgrade their military forces, as well as, their nuclear arsenal, partly because of the stupid neocon policy, adopted by Obama, that makes them feel directly threatened and quite nervous. Forget that in the area there is a North Korea that no one knows what it can do and how far it will go with its nukes, if only would "smell" a coalition of US-led forces that are about to operate close to its territory. If Trump thinks that Putin will sit back and watch this happening, he is completely mistaken. Apart from the fact that Russia and China are committed by the Shanghai Cooperation Organization (SCO), which is expanding on security and defence issues, Putin knows that, if China falls, Russia will be next. Therefore, it would be a major mistake for Trump to obey to the lunatic neocon plans because the gates of hell towards WWIII will be opened for good.

Why Trump's "Border Tax Proposal" Is The "Most Important Thing Nobody Is Talking About" --While the market, and various pundits and economists have been mostly focused on the still to be disclosed details of Trump's infrastructure spending aspects of his fiscal plan, "one of the least talked about but possibly most important tax shifts in the history of the United States" is, according to DB, House Speaker Paul Ryan’s and President-elect Trump’s “border tax adjustment” proposal.This is part of the “Better Way” reform package and also figures prominently in the writings of senior Trump administration officials.What is it? Put simply, the proposal would tax US imports at the corporate income tax rate, while exempting income earned from exports from any taxation. The reform would closely mirror tax border adjustments in economies with consumption-based VAT tax systems. If enacted, the plan will likely be extremely bullish for the US dollar. What’s more, it would have a transformational impact on the US trade relationship with the rest of the world. Consider the below:

A “border tax adjustment” would, roughly speaking, be equivalent to a 15% one-off devaluation of the dollar. Imports would be 20% more expensive, because corporates would have to pay the new 20% corporate tax rate on their value. Exports would be roughly 12% “cheaper”, because for every $33 of earnings earned from $100 of exports (we use the 33% gross margin of the S&P), there would be a 12% tax cost ($33 earnings*35% current tax rate) that would no longer be imposed on corporates.Taking the average impact on the prices of exports and imports is equivalent to a 15% drop in the dollar.

A border tax adjustment would be very inflationary. The price of exports doesn’t affect the US consumption basket so would have no impact on CPI. However, the cost of imports would go up by 20%, which based on a simple relationship between import PPI and US inflation would be equivalent to a 5% rise in the CPI.

A border tax adjustment would be very positive for the US trade balance.Similarly to the dollar calculations, a border tax adjustment would be equivalent to an across the board import tariff of 20% and an export subsidy of 12%. Keeping all else constant and applying standard trade elasticity impact parameters to an average of the two estimates results in a more than 2% drop in the trade deficit equivalent to more than 400bn USD, or equivalently, an almost complete closing of the US trade deficit.

ExxonMobil helped defeat Russia sanctions bill - ExxonMobil successfully lobbied against a bill that would have made it harder for the next president to lift sanctions against Russia, clearing the way for the oil giant to restart a program worth billions of dollars if Donald Trump eases those restrictions as president. The company’s effort could be helped by outgoing CEO Rex Tillerson, who, if confirmed as secretary of state, would be a key adviser on the decision. The bill, known as the STAND for Ukraine Act, would have converted into law for five years President Barack Obama’s measures punishing Russia for annexing Crimea, making it more difficult for Trump to roll them back. The Senate left town on Monday without acting on the bill, making it easier for Trump to end the sanctions with a stroke of the pen. The sanctions forced Exxon to step back from a drilling project in Russia’s Arctic, a loss that the company valued in a regulatory filing at as much as $1 billion. Exxon also lobbied the Senate Foreign Relations Committee against previous bills punishing Russia for the invasion of Ukraine, according to a person familiar with the company’s efforts on Capitol Hill. Exxon’s intervention against the sanctions bill could add to concerns among senators — including Republicans John McCain, Lindsey Graham and Marco Rubio — that Tillerson is too chummy with Vladimir Putin. Exxon’s business partner in Russia is state-owned Rosneft, led by Igor Sechin, a close Putin ally who was sanctioned by the Treasury Department in 2014. Tillerson and Putin personally concluded the joint venture in 2011.

Russia Missing from Trump’s Top Defense Priorities, According to DoD Memo - A Pentagon memo outlining the incoming Trump administration’s top “defense priorities” identifies defeating the Islamic State, eliminating budget caps, developing a new cybersecurity strategy, and finding greater efficiencies as the president-elect’s primary concerns. But the memo, obtained by Foreign Policy, does not include any mention of Russia, which has been identified by senior military officials as the No. 1 threat to the United States. “People there now would be pretty concerned to see Russia not on the list,” said Evelyn Farkas, a former senior Pentagon official who worked on Russia policy before leaving in 2015. For years, top cabinet officials at the Defense Department and the intelligence community cited Russia as the foremost threat because of its vast nuclear arsenal, sophisticated cyber capabilities, recently modernized military, and willingness to challenge the United States and its allies in the Middle East, Eastern Europe, and other regions. Gen. Joseph Dunford, chairman of the Joint Chiefs of Staff, who will remain in that role after Trump takes office Jan. 20, told Congress last year that no other threat is more serious. “If you want to talk about a nation that could pose an existential threat to the United States, I’d have to point to Russia,” Dunford told the Senate Foreign Relations Committee. “If you look at their behavior, it’s nothing short of alarming.” He listed China, North Korea, and the Islamic State as the next biggest threats, in that order.

Kremlin Warns Of Response To Latest US Sanctions, Says "Almost All Communication With US Is Frozen" - In response to the latest imposition of US sanctions on Russia, the Kremlin said on Wednesday that the new sanctions would further damage relations between the two countries and that Moscow would respond with its own measures. "We regret that Washington is continuing on this destructive path," Kremlin spokesman Dmitry Peskov told reporters on a conference call. As a reminder, on Tuesday the United States widened sanctions against Russian businessmen and companies adopted after Russia's annexation of Crimea in 2014 and the conflict in Ukraine. "We believe this damages bilateral relations ... Russia will take commensurate measures." Then again, it is difficult to see how sanctions between the two administration could be any more "damaged": also on Wednesday, the Kremlin said it did not expect the incoming U.S. administration to reject NATO enlargement overnight and that almost all communications channels between Russia and the United States were frozen, the RIA news agency reported. “Almost every level of dialogue with the United States is frozen. We don’t communicate with one another, or (if we do) we do so minimally,” Peskov said.

Trump Calls For Expansion Of US Nuclear Capability, Hours After Putin Urges Russia To Do The Same --In a curious convergence of superpower opinions, earlier on Thursday, Russian President Vladimir Putin called for the country to reinforce its military nuclear potential. In a speech that recapped military activities in 2016, Putin said the army's preparedness has "considerably increased" and called for continued improvement that would ensure it can "neutralise any military threat"."We need to strengthen the military potential of strategic nuclear forces, especially with missile complexes that can reliably penetrate any existing and prospective missile defence systems," the Russian president said.He added that Russia "must carefully monitor any changes in the balance of power and in the political-military situation in the world, especially along Russian borders, and quickly adapt plans for neutralising threats to our country."Fast forward a few hours, when just before noon Eastern, Trump again took to Twitter and the president elect echoed virtually every word Putin said earlier, stating "The United States must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses regarding nukes." Aside from this being one of the very first actual policy recommendations proposed by Trump, the fact that suddenly both Putin and Trump are calling for a re-escalation of the nuclear arms race at a time when Russia and the US under an allegedly Russian-friendly Trump administration, are expected to restore relations and find a common dialogue, makes us rather nervous especially since with both countries' arsenals already vastly greater than any other, potential third power in the nuclear arms race, the implied message is that both superpowers are squarely looking at each other when calling for more nuclear weapons.

Trump Doubles Down On Nukes: "Let It Be An Arms Race, We'll Outlast Them All" -- Earlier this morning, president-elect Trump appeared on MSNBC's Morning Joe to discuss the following tweet he sent out yesterday calling for an expanded nuclear arsenal. “The United States must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses regarding nukes” When asked by co-host Mika Brzezinski to clarify the tweet, Trump gave a response that she, nor anyone else for that matter, was expecting. “Let it be an arms race, we will outmatch them at every pass … and outlast them all.” BREAKING: Trump to #morningjoe on the nukes tweet: 'Let it be an arms race'https://t.co/X9FMNtgKPK— Morning Joe (@Morning_Joe) December 23, 2016 Meanwhile, Trump's newly appointed Press Secretary, Sean Spicer, appeared on the Today Show to calm the nerves of an anxious Matt Lauer who asked whether Trump was planning to "reverse 40 years of policy in this country."“[T]here’s not going to be [an arms race] because he is going to ensure that other countries get the message he is not going to sit back and allow that.” “What’s going to happen is they will all come to their senses and we will all be just fine.”

Is *this* what is going on? - In 1987, Trump made his goal of Russian collaboration on nuclear power explicit: The Soviet Union and the US should partner to form a nuclear superpower with the intention of intimidating other countries into dropping their own nuclear plans. “Most of those [pre-nuclear] countries are in one form or another dominated by the US and the Soviet Union,” Trump told journalist Roy Rosenbaum. “Between those two nations you have the power to dominate any of those countries. So we should use our power of economic retaliation and they use their powers of retaliation, and between the two of us we will prevent the problem from happening. It would have been better having done something five years ago. But I believe even a country such as Pakistan would have to do something now. Five years from now they’ll laugh.” Nuclear-related sanctions, from the two major powers, were to be applied to both Pakistan and France [sic]. Here is the full article, I cannot vouch for this account or any particular interpretation of it, but the hypothesis is new to me and so I present it to you as well.

Kissinger calls Trump a ‘phenomenon that foreign countries haven’t seen’ - Former Secretary of State Henry Kissinger said in an interview Sunday that President-elect Donald Trump could go down in history as a "very considerable president.""Donald Trump is a phenomenon that foreign countries haven't seen," Kissinger said on CBS's "Face The Nation.""So it is a shocking experience to them that he came in to office. At the same time, extraordinary opportunity." Kissinger said every country now has to consider two things."One, their perception that the previous president, or the outgoing president, basically withdrew America from international politics, so that they had to make their own assessments of their necessities," he said."And secondly, that here is a new president who's asking a lot of unfamiliar questions. And because of the combination of the partial vacuum and the new questions, one could imagine that something remarkable and new emerges out of it."When asked if he has a sense about the president-elect's emerging foreign policy vision, Kissinger said he and the billionaire appear to operate differently, but offered some praise for the issues Trump has raised."I think he operates by a kind of instinct that is a different form of analysis as my more academic one," Kissinger said. "But he's raised a number of issues that I think are important, very important. And if they're addressed properly, could lead to good — great results."

Kissinger, a longtime Putin confidant, sidles up to Trump --Back in the 1990s, Henry Kissinger, the legendary former U.S. secretary of state-turned-global consultant, encountered an intriguing young Russian and proceeded to ask him a litany of questions about his background. “I worked in intelligence,” Vladimir Putin finally told him, to which Kissinger replied: “All decent people got their start in intelligence. I did, too.” As Putin climbed the ranks in the Kremlin, eventually becoming the autocratic president he is today, he and Kissinger kept up a warm rapport even as the United States and Russia grew further apart. Kissinger is one of the few Americans to meet frequently with Putin, one former U.S. ambassador recently recalled -- along with movie star Steven Seagal and ExxonMobil CEO Rex Tillerson, the likely next secretary of state. Now, as Donald Trump signals that he wants a more cooperative relationship with Moscow, the 93-year-old Kissinger is positioning himself as a potential intermediary — meeting with the president-elect in private and flattering him in public. Like Trump, Kissinger has also cast doubt on intelligence agencies’ conclusion that Russia sought to sway the election in Trump's favor, telling a recent interviewer: “They were hacking, but the use they allegedly made of this hacking eludes me.” Some have expressed surprise that the urbane, cerebral former top diplomat would have any affinity for the brash, shoot-from-the-lip Trump. But seasoned Kissinger watchers say it’s vintage behavior for a foreign policy realist who has cozied up to all sorts of kings and presidents for decades. And in fact, Trump may wind up an ideal vessel for Kissinger -- the architect of detente with the Soviets in the 1970s -- to realize his longstanding goal of warmer ties between the two Cold War adversaries.

Trump Administration May Use Global Magnitsky Act Human Rights Authority to Advance Foreign Policy Goals - Jerri-Lynn Scofield - Embedded in the 3,000-page National Defense Authorization Act, passed by both houses of Congress by veto-proof majorities earlier this month and sent to the President on December 14, the Global Magnitsky Human Rights Accountability Act provides new authority for the executive branch to impose visa bans or revocations, or sanctions (including property seizures) on individuals accused of committing human rights violations or engaging in gross corruption. As Sarah A. Altshuller has written on law firm Foley Hoag’s Corporate Social Responsibility and the Law blogThe Act may be part of a paradigm shift in the way U.S. sanctions law is utilized. Unlike most U.S. sanctions regimes that target issues in specific countries by sanctioning entire governments or groups of individuals and entities, the Act would apply sanction to individuals anywhere in the world who have engaged in activities deemed to violate certain international human rights standards. The Act could offer an expanded scope to the Treasury Department’s Office of Foreign Assets Control (“OFAC”) in promoting U.S. policies globally, much as the 2015 sanctions on malicious cybersecurity undertakings expanded the group of activities, including drug trafficking and terrorism, that are global targets of OFAC sanctions. Under the terms of the Act, the State Department’s Bureau of Democracy, Human Rights, and Labor (“DRL”) would be given authority to determine who is placed on the sanctions list, which will presumably be implemented by OFAC. In making these determinations, the Administration is required to consider “credible information obtained by other countries and nongovernmental organizations that monitor violations of human rights” as well as information provided by certain committees of Congress.”>

Saudi Arabia Lobbying To Amend Sept 11 Law --Following last week's report that Saudi Arabia is starting to apply pressure on the incoming Trump administration by hinting it could move the Aramco IPO away from New York to some still undetermined venue due to concerns the recently passed Sept 11 law could make business in the US problematic, on Sunday Saudi Arabia's foreign minister said he has been lobbying US legislators to change a law allowing victims of the September 11, 2001 attacks to sue the kingdom. According to AFP, Adel al-Jubeir told reporters he had returned from an extended stay in the United States, which was partly "to try to persuade them that there needs to be an amendment of the law", the Justice Against Sponsors of Terrorism Act (JASTA). In September, the US Congress voted overwhelmingly to override President Barack Obama's veto of the JASTA. While 15 of the 19 Al-Qaeda hijackers who carried out the 9/11 attacks were Saudi, Riyadh continues to deny any ties to the plotters who killed nearly 3,000 people, and is worried disclosures in court could lead to material complications about conducting business in America. "We believe the law, that curtails sovereign immunities, represents a grave danger to the international system," Jubeir said at a joint press conference with visiting US Secretary of State John Kerry.

What Jeff Sessions as attorney general will mean for the Iran Deal -- As the country’s new top cop, Jeff Sessions will have sweeping authority to shape the Justice Department’s policies and priorities—some of which have the potential to affect relations with Iran, if indirectly. While the attorney general does not have any big role to play directly in terms of the Iran deal, he is, however, responsible for enforcing and prosecuting key legislation that could affect the deal. Suppose, for example, that he decided to prosecute an Iranian for procuring dual-use items that are covered under the deal's procurement channel, but does not first use the dispute resolution mechanism that is in place under the Iran deal. What kind of tension might this cause between Washington and Tehran? In fact, the Obama administration has been quite mindful of these perceptions—deciding to take a hands-off approach to pursuing new indictments that may rock the boat so far as the deal is concerned. The FBI, for example, has several cases that are essentially on hold out of fear of upending the agreement. In other words, the Justice Department’s actions can carry a ripple effect. For example, as head of the Justice Department, the attorney general decides if and when the department should undertake investigations or prosecutions related to currently existing Iran sanctions—regarding things such as Iran’s conventional missiles, its sponsoring of terrorism, its possible human rights violations, and any other similar activities. He can also decide when to pursue asset forfeitures, and what the criminal stakes will be for violators.

Despite Pressure From Trump, UN Votes to Demand End to Israeli Settlements -- Despite unusual diplomatic maneuvering involving President-elect Donald Trump, Israel, and Egypt on Thursday, the United Nations Security Council passed a historic resolution on Friday demanding an end to Israeli settlements. The United States abstained, effectively allowing the measure to be approved.Egypt withdrew the original resolution on Thursday afternoon, reportedly "under pressure" from Trump—who tweeted on the matter Thursday morning—and Israel. Had this move worked, it could have punted the measure to the incoming Trump administration, which is seen as more friendly to Israel than that of President Barack Obama—especially after Trump's nomination last week of conservative hardliner David Friedman to serve as U.S. ambassador to Israel.But Reutersreported Friday that Security Council members New Zealand, Malaysia, Venezuela, and Senegal stepped in and the vote took place after all on Friday afternoon. Al Jazeera explains: The draft resolution would demand Israel "immediately and completely cease all settlement activities in the occupied Palestinian territory, including East Jerusalem", and says the establishment of settlements by Israel has "no legal validity and constitutes a flagrant violation under international law".Indeed, as Mohammad Alsaafin of Al Jazeera wrote on Twitter: UN resolution that's become such a controversial issue the last couple of days only asks Israel to adhere to international law. That's it. (@malsaafin) December 23, 2016. The U.S. abstention, which was expected, was described by Reuters as "a relatively rare step by Washington, which usually shields Israel from such action," and "as a parting shot by U.S. President Barack Obama who has had an acrimonious relationship with Israeli Prime Minister Benjamin Netanyahu and who has made settlements a major target of peace efforts that have proven ultimately futile."

Obama Administration Abstains, Defying Trump, As UN Votes To Condemn Israel Settlements --Israel lashed out at the Obama administration "friends don't act that way" after Ambassador Power abstained (refusing to veto) as The United Nations passed a resolution demanding Israel to stop settlement building on occupied Palestinian territory. As NYTimes notes, the administration’s decision not to veto the measure broke a longstanding American tradition of serving as Israel’s sturdiest diplomatic shield, and defied extraordinary pressure from President-elect Trump. As The New York Times reports, the administration’s decision not to veto the measure came a day after Mr. Trump personally intervened to keep the draft measure, proposed by Egypt, from coming up for a vote on Thursday, as scheduled.Mr. Trump’s aides said he spoke to the Israeli prime minister,Benjamin Netanyahu. Both men also spoke to the Egyptian president, Abdel Fattah el-Sisi. Egypt postponed the vote.But in a show of mounting frustration, a group of other countries on the 15-member Security Council — all of them relatively powerless temporary members with rotating two-year seats — snatched the resolution away from Egypt and put it up for a vote Friday afternoon.It passed 14 votes in favor, with the United States abstaining.

Trump's Ominous Warning To The UN: "Things Will Be Different After Jan. 20th" -- Following today's surprising decision by the US' Samantha Power to abstain in a UN vote over Israel settlements, one which provoked Israel to lash out at the Obama administration "friends don't act that way", but more importantly defied Trump who in a previous tweet urged Obama to veto the resolution, it was only a question of how long before Trump tweets his response. The time was less than an hour, because just minutes after the vote, the president-elect slammed the current administration's decision, while ominously warning the UN that it would be "different" under his presidency. "As to the U.N., things will be different after Jan. 20th," Trump tweeted Friday. As a reminder, the U.S. had the ability to veto any resolution but abstained from doing so, despite pressure from Trump, Israeli Prime Minister Benjamin Netanyahu, and U.S. lawmakers on both sides. Furthermore, the administration’s decision to let it pass represents a break from the longstanding U.S. policy of shielding Israel from U.N. reproaches. To be sure, there is another side to the story, with Israel’s settlements have long been seen by critics as human rights violations as an obstacle to achieving peace between Israel and the Palestinians. In any case, Trump pressured Obama before the U.N. vote to veto the resolution. "As the United States has long maintained, peace between the Israelis and the Palestinians will only come through direct negotiations between the parties, and not through the imposition of terms by the United Nations,” the president-elect said in a statement Thursday. "This puts Israel in a very poor negotiating position and is extremely unfair to all Israelis." Samantha Power, the U.S. ambassador to the U.N., explained the move in a statement to the council, condemning Netanyahu for continuing settlement expansion while paying lip service to the idea of a two-state solution. “One cannot simultaneously champion expanding Israeli settlements and champion a viable two-state solution that would end the conflict,” she said. “One has to make a choice between settlements and separation.”

The real reason the GOP is gung-ho on repealing Obamacare: It would give the rich a huge tax cut -- People wondering why Republicans are so hell-bent on repealing Obamacareeven though that would cost 20 million Americans their health insurance haven’t been heeding the old investigator’s maxim to “follow the money.” The path leads to the Affordable Care Act’s tax provisions, and the discovery that repeal would provide the wealthiest taxpayers with an immediate tax cut totaling $346 billion over 10 years. Every cent of that would go to taxpayers earning more than $200,000 a year ($250,000 for couples). As Nicholas Bagley of the University of Michigan observed a few days after the election, the imperative of handing their wealthy patrons a gift of this magnitude may well outweigh their solicitude for the mostly middle- and low-income constituents whose individual insurance plans would be at risk from repeal.That tax cut would result from repeal of two major ACA tax provisions aimed at the wealthy. But the figure only hints at the implications of Obamacare repeal on Americans’ incomes. According to a study released this week by the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution, Obamacare repeal would reduce the average incomes of Americans in the lowest 60% of income earners, mostly because of the loss of tax subsidies for insurance premiums. But it would give the incomes of those in the top 20% — and especially the top 1% — a significant boost. “In general,” the TPC found, “repealing the health reform law would, on average, cut taxes for the rich and raise them for low-income households.”

Larry Kudlow Isn’t an Economist, but He Plays One on TV – Dave Dayen - The overriding quality necessary for landing a position in Donald Trump’s administration is that Trump has to know you from TV. Most of his cabinet selections have logged plenty of time in cable-news green rooms. Monica Crowley and K.T. MacFarland, two named advisers, were paid contributors to Fox News. Secretary-of-state nominee Rex Tillerson is perhaps an exception, but he came highly recommended from TV faves Condi Rice and Dick Cheney. So in that context, floating Larry Kudlow to run the Council of Economic Advisers is perfectly apt. Kudlow isn’t an economist, but he plays one on TV. And more important, he confidently (and usually wrongly) favors what has to be seen as the dominant economic gospel of the Trump administration: tax cuts. Before we get into that, let’s just note how consistently wrong Kudlow has been over the years. He denied the existence of a housing bubble, even after it collapsed. He touted the “Bush boom” and boasted that there wouldn’t be any recession in December 2007—the month the recession began. Once the downturn was undeniable, Kudlow dismissed it, said it would be mild, predicted the bottom over and over as the economy continued to sink. He recommended buying stocks in September 2008, the month the market lost a substantial amount of its value. Baghdad Bob looks at this guy and thinks he might need to get his facts straight. More than wrong, Kudlow can be absolutely psychopathic in his veneration of the market. He argued that banks that manipulated benchmark interest rates were actually the victims, rather than criminals. He commented on the Fukushima disaster in 2011: “The human toll here looks to be much worse than the economic toll, and we can be grateful for that.”

Kudlow Is a Troubling Economics Adviser for Trump - Noah Smith – Donald Trump is reportedly close to picking Larry Kudlow to be the chairman of his Council of Economic Advisers. This will doubtless annoy many economists and policy wonks because Kudlow isn’t an economist -- he didn’t even major in econ in college. He’s an econ commentator, much like me, but without the academic training. But the general public probably won’t even notice or care that he lacks a doctorate in economics. Unlike “physicist” or “biologist,” all you have to do in order to be considered an “economist” is to declare yourself one. This lack of faith in academic credentials might have to do with the low regard in which much of the public holds the econ profession. But in any case, it means that to most people, Kudlow’s bona fides are just as burnished as those of Alan Krueger, Christina Romer, Ben Bernanke or any of the other former holders of the position.Academic credentials aside, there are actually some important reasons to worry about Kudlow. One is that the former CNBC host has made some spectacularly bad calls in the past. In December 2007, as the housing bubble was already collapsing and the financial crisis was on the horizon, Kudlow declared that “there ain’t no recession.” One piece of evidence he cited for this optimistic claim was low inflation -- seemingly forgetting that low inflation is usually a hallmark of recessions, not expansions. He concluded with this memorable flourish:The recession debate is over. It’s not gonna happen. Time to move on. At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). The Bush boom is alive and well. It’s finishing up its sixth splendid year with many more years to come. Now, all commentators make bad calls once in a while and plenty of them didn’t anticipate the financial crisis or the Great Recession. But Kudlow’s miss on the recession demonstrates three things that worry me: overconfidence, partisanship and an excessive focus on the problems of the 1970s.

Larry Kudlow and Economics in the Trump Administration - James Kwak -- Noah Smith (along with a fair section of the Internet) has some concerns about Larry Kudlow as chair of the Council of Economic Advisers: he’s overconfident, too much of a partisan, and fixated on nonexistent problems (e.g., inflation). I’m not so worried that he’s on Team Republican; after all, Donald Trump gets to pick the advisers he wants, and they shouldn’t be rejected solely because they take political sides. But I am worried about what Kudlow’s appointment means for the relationship between economics and policy. The world is a complicated place. Anyone who studies society in depth should learn to have respect for that fact. At any given moment, we have only a hazy understanding of what combinations of transitory phenomena and underlying structural factors produce what outcomes. I don’t particularly care that Larry Kudlow doesn’t have a Ph.D. in economics. Paul Volcker didn’t have one either (as far as I can tell), and few Democrats would have seriously objected to him as chair of the CEA. What concerns me is that he has been working as an economist for decades—that is, he makes money by thinking and talking about economic issues—yet his conception of the discipline seems limited to the simple, theoretical relationships of Economics 101. Most of Kudlow’s thinking about economic issues appears to boil down to three ideas. The first is that tax cuts increase economic growth—a mantra that conservatives have repeated for decades, yet is not supported by reviews of existingresearch. The second is that expanding the money supply will necessarily generate high inflation, on which basis Kudlow predicted a “major inflationary plunge” just as the Great Recession was beginning. The third is that an expensive currency—what politicians call a “strong dollar,” but Kudlow calls “King Dollar” (with the capitals)—is good for the economy. The first two ideas are things you would expect to hear from a first-semester college freshman (like Jeb Hensarling in his Texas A&M days). They make sense on a two-dimensional diagram, but they are at best distant approximations of how the world works. The third—King Dollar—is just weird. The value of a currency is the outcome of various factors, such as interest rates, and it doesn’t make sense to think of that outcome in isolation from the things you would need to do to produce that outcome.

Jeb Hensarling and the Allure of Economism - James Kwak -- The Wall Street Journal has a profile up on Mike Crapo and Jeb Hensarling, the key committee chairs (likely in Crapo’s case) who will repeal or rewrite the Dodd-Frank Wall Street Reform and Consumer Protection Act. It’s clear that both are planning to roll back or dilute many of the provisions of Dodd-Frank, particularly those that protect consumers from toxic financial products and those that impose restrictions on banks (which, together, make up most of the act). Hensarling is about as clear a proponent of economism—the belief that the world operates exactly as described in Economics 101 models—as you’re likely to find. He majored in economics at Texas A&M, where one of his professors was none other than Phil Gramm. Hensarling described his college exposure to economics this way: “Even though I had grown up as a Republican, I didn’t know why I was a Republican until I studied economics. I suddenly saw how free-market economics provided the maximum good to the maximum number, and I became convinced that if I had an opportunity, I’d like to serve in public office and further the cause of the free market.” This is not a unique story. Robert Bork, who took economics at the University of Chicago Law School, recalled the experience as a “religious conversion” that “changed our view of the whole world” Introductory economics, and particularly the competitive market model, can be seductive that way. The models are so simple, logical, and compelling that they seem to unlock a whole new way of seeing the world. The problem, however, is that the people who are most captivated by the first theorem of welfare economics (the one that says that competitive markets produce optimal outcomes) are often the least good at remembering the assumptions that don’t apply and the caveats that do apply in the real world. They forget that the power of a theory in the abstract bears no relationship to its accuracy in practice.

Trump Nominates Billionaire Virtu Founder Vincent Viola As Secretary Of The Army --Add another billionaire to the ranks of individuals in Donald Trump's administration. President-elect Donald Trump has announced the nomination of Vincent Viola as secretary of the Army. Viola is a retired paratrooper, former chairman of NYMEX, founder of HFT trading powerhouse Virtu Financial and current owner of the NHL’s Florida Panthers team. The Brooklyn-born Viola graduated from West Point in 1977 and served in the 101st Airborne Division. After his active service ended, he worked as a trader at the New York Mercantile Exchange (NYMEX), where he became chairman in 2001. In 2008, he founded Virtu Financial. Vincent Viola nominated as Secretary of the Army. » https://t.co/7vjSvwDlo3pic.twitter.com/BUXByZOgzL The nomination of the Virtu strongman likely means that any hopes of a crackdown against HFT in the current administration can be postponed indefinitely.

Virtu Financial Execs Were Major Donors to Clinton and Schumer as Trump Nominates Its Top Dog as Secretary of the Army -- Pam Martens - Something smelled unusually rotten in Trumpland when Democratic Senator from New York Chuck Schumer fell all over himself to endorse Donald Trump’s nominee, Vincent Viola, as Secretary of the Army. Viola has never served in battle and has spent the bulk of his adult life as an oil and gas futures trader. He became a billionaire from his stake in a high frequency trading firm, Virtu Financial, which he took public last year. Multiple media outlets reported that Viola was a donor to Donald Trump’s campaign. According to Federal Election Commission (FEC) records, however, Viola’s only Federal election contribution in the past two years was a $5,000 donation to the CME Group Pac in December 2015. Raising further questions about what is actually going on here, Virtu Financial’s CEO, Douglas Cifu, was a major donor to Hillary Clinton’s campaign, giving $10,000 to the Hillary Victory Fund on August 22, 2016. On the same date, Cifu gave $10,000 to the Democratic National Committee. Even more eye-popping, Cifu and nine other executives of Virtu Financial gave donations ranging from $1,000 to the maximum $2700 to Senator Chuck Schumer’s re-election campaign. Those executives include Brian Palmer, the Global Head of Development and Joseph Molluso, Virtu’s Executive Vice President and Chief Financial Officer.The FEC shows no employee of Virtu Financial making a donation to Donald Trump’s campaign. The big donor at Virtu, CEO Douglas Cifu, was formerly a law partner at Paul, Weiss, Rifkind, Wharton & Garrison where he served as a member of its Management Committee. Paul Weiss has been heavily connected to Citigroup through the years, getting it off serial charges of fraud. Citigroup execs played a major role in the Bill Clinton and Barack Obama administrations. Michael Froman, a Citigroup executive at the time the bank was collapsing and receiving bailout assistance in 2008, led the cabinet staffing decisions for Obama’s first term as President.

Trump’s Cabinet Choices Have Given A Lot Of Money To Senators - When the U.S. Senate decides next year whether to confirm Wilbur Ross as secretary of commerce, among the 100 senators voting on his nomination will be eight people whom Ross has supported with a combined $62,100 in campaign contributions since 1990. When Andrew Puzder’s nomination to be secretary of labor goes before the Senate, it will be decided in part by 17 politicians whose campaigns he has supported with more than $150,000. And when senators vote on Betsy DeVos, Donald Trump’s choice for secretary of education, the chamber will include 20 members whom she has supported over the years with contributions totaling $167,300. An analysis of campaign-finance records by the Center for Responsive Politics, a research organization that tracks money in politics, found that of the 13 Cabinet picks Trump has made so far,1 seven have given a total of more than $455,000 since 1990 to support people who will serve in the next Senate, either directly to their campaigns or to outside groups backing them. The analysis comprises contributions since 1990 to people who will be in the Senate when it votes on the confirmations, including contributions toward earlier campaigns for federal offices such as for U.S. House.2 Some Trump picks for Cabinet-level positions — which are not officially part of the Cabinet but require Senate confirmation — have also given large sums to the politicans who will decide on their nominations. Linda McMahon, Trump’s pick to lead the Small Business Administration, for example, has contributed more than $650,000 to members of the incoming Senate since 1990.

Apple CEO Tim Cook Met With Trump to “Engage” on Gigantic Corporate Tax Cut - Why did executives from 11 of America’s biggest technology companies obediently show up when they were summoned by the president-elect to meet at Trump Tower? Some might suspect it has something to do with the $560 billion in profits those companies have stashed overseas — and refuse to bring back until the U.S. government gives them an enormous tax break. Apple CEO Tim Cook has now confirmed that that was indeed part of his motivation to attend the tech summit with Donald Trump. On Tuesday, TechCrunch obtained Cook’s response on Apple’s internal network to a question from an employee about the Trump meeting. Cook first described how it was critical for Apple to “engage” with governments on what he called “our key areas of focus.” But in the third paragraph, Cook acknowledged, “We have other things that are more business-centric — like tax reform.”Here’s what Cook’s vague description meant: Apple wants a huge tax cut, and Trump has promised to deliver one that would save the company about $40 billion to $50 billion.The U.S. has a peculiar system of corporate taxation. On the one hand, it taxes U.S.-based multinationals on profits earned anywhere on earth at a statutory rate of 35 percent. On the other hand, corporations can defer paying taxes on overseas profits until they bring the money back to the U.S. This creates two incentives for multinationals. First, it encourages them to use ludicrous accounting shenanigans, many pioneered by Apple, to pretend as much of its profits as possible were “earned” in foreign countries, like Ireland, with super-low tax rates. Second, they’ll hold the money hostage overseas until the U.S. government becomes so desperate for revenue that it offers them a sweetheart deal to bring it back.

Ayn Rand and Corporate Tax Cuts Won’t Mend the Economy - In a post on LinkedIn the other day, Ray Dalio, one of the world’s richest and most successful hedge-fund managers, offered some thoughts on the incoming Trump Administration. If “you haven’t read Ayn Rand lately, I suggest that you do as her books pretty well capture the mindset,” Dalio, the founder and chief executive of Bridgewater Associates, wrote. “This new administration hates weak, unproductive, socialist people and policies, and it admires strong, can-do, profit makers. It wants to, and probably will, shift the environment from one that makes profit makers villains with limited power to one that makes them heroes with significant power.” Dalio, whom I profiled, in 2011, himself holds a harsh, Darwinian view of the world. One of his sidekicks at Bridgewater, David McCormick, is being considered for a senior post in the new Administration. Dalio, however, views himself as an analyst and investor rather than a partisan, and his unvarnished post reflects the reality that Donald Trump, after running as an economic populist and tribune of the working stiff, has stuffed his Cabinet with billionaires, bankers, and conservative political ideologues. “This will not just be a shift in government policy, but also a shift in how government policy is pursued,” Dalio wrote. “Trump is a deal maker who negotiates hard, and doesn’t mind getting banged around or banging others around. Similarly, the people he chose are bold and hell-bent on playing hardball to make big changes happen in economics and in foreign policy (as well as other areas such as education, environmental policies, etc.).” In moments of dramatic political change—Dalio claimed that the Trump era could be even more significant than the 1978-1982 shift to the right that saw Margaret Thatcher, Ronald Reagan, and Helmut Kohl elected—one of the big questions is whether the new policies being implemented will work. Dalio offered an upbeat prognosis. He argued that Trump’s proposals to slash corporate tax rates and give big businesses like Apple and Microsoft financial incentives to repatriate trillions of dollars in profits that they are holding abroad could “ignite animal spirits and attract productive capital” to the United States.

Trump No Longer Wants To "Drain The Swamp", Gingrich Admits -- While it will hardly come as a surprise to anyone following the ongoing additions to Trump's cabinet, one can now effectively cross off "draining the swamp" from the list of Trump's stated intentions. Speaking in an NPR interview on Wednesday, former Speaker Newt Gingrich said that Trump has taken a different tone as president-elect and may be leaving behind his campaign promise to “drain the swamp.” Gingrich told "Morning Edition" that he was told Trump “now says [the phrase] was cute, but he doesn’t want to use it anymore.” "I'm told he now just disclaims that. He now says it was cute, but he doesn't want to use it anymore," Gingrich said, and also predicted there would be "constant fighting" over Trump's efforts to reduce the influence of lobbyists and Washington insiders. “But, you know, he is my leader, and if he decides to drop the swamp and the alligator I will drop the swamp and the alligator,” he said. Gingrich, who has been a close adviser to Trump, said he likes "drain the swamp" because it “vividly illustrates the problem, because all people in this city who are the alligators are going to hate the swamp being drained.” It also vividly illustrates why draining the swamp is virtually impossible when even the candidate who runs on such a promise promptly backs away from it once elected.

How Did a Nation Crippled by Wall Street Billionaires End Up With Them Running the Country? -- Pam Martens - Donald Trump is increasingly looking like Wall Street’s back up plan in the event that the Wall Street Democrats didn’t triumph in the 2016 election. Trump has appointed two Goldman Sachs alumni and the current President of Goldman Sachs to top posts in his administration. On Monday, Trump announced that Vincent Viola, a billionaire who spent the bulk of his adult life trading oil and gas futures on Wall Street, would become Secretary of the Army – at a time when tens of thousands of service members rely on food pantries to get by. Forbes reports this about how Viola gets by: “Viola owns a 20,000-square-foot townhouse on the Upper East Side of Manhattan, near Central Park. In December 2013 he listed the home — complete with a giant red bow tied across its facade — for a staggering $114 million. He later quietly reduced the price to $98 million before pulling it from the market.” Curiously, the New York Times called Trump’s nominee for Secretary of the Army, a “retired Army Major.” That phrasing suggests Viola had a long military career including battle experience. In fact, Viola achieved his rank of Major in the reserves. Shortly after graduating West Point nearly 40 years ago, the Wall Street Journal reports that Viola only served “several years” of active duty in the 101st Airborne Division at Fort Campbell, Kentucky. According to Federal Election Commission records, over the past 14 years, Viola has kicked in over $300,000 to both Democrats and Republicans and their committees. The images attached to those filings show that he has repeatedly listed his career as a “commodities trader.” Apparently, in Trump’s view, having Wall Street run the U.S. Treasury Department and his economic team is no longer adequate. (See related articles below.) A high frequency trader will now govern the largest branch of the U.S. military.Wall Street veteran and critic Nomi Prins calls Trump’s anti-establishment rhetoric during the campaign “the biggest scam of his career,” writing the following at her blog: “In the realm of politico-financial power and in Trump’s experience and ideology, the one with the most toys always wins. So it’s hardly a surprise that his money- and power-centric cabinet won’t be focused on public service or patriotism or civic duty, but on the consolidation of corporate and private gain at the expense of the citizenry.”

Why some of Trump’s appointees are likely to be highly effective - Tyler Cowen - That is my latest Bloomberg column, and here are some short excerpts: If the political default is not much change in the first place, introducing more variance into the policy process may shake up at least some parts of the status quo. There will be plenty of gaffes, dead ends and policy embarrassments along the way, but don’t confuse those with a lack of results. An incoming administration that does not mind embarrassment is a bit like a sports opponent who has little to lose. It is easy enough to say that neurosurgeon Ben Carson is unqualified to lead the Department of Housing and Urban Development, but it would be a mistake to dismiss his potential influence… One rumor is that Sylvester Stallone has been discussed in conjunction with chairing the National Endowment for the Arts. That suggestion might meet with mockery in some quarters, but Stallone’s ability to draw attention to the agency and its mission might prove more important than whatever shortcomings he would bring to the job …Under one model of the federal government, narrowly defined administrative competence is most required at the all-important departments of Treasury, State, and Defense, and arguably the Trump picks for those areas are consistent with that view. (They are Steven Mnuchin, a financier, Rex Tillerson, a corporate executive and James Mattis, a military man, respectively.) For many of the other picks, there’s a case for taking more chances. …I interpret Trump’s nominations as a sign of an intelligent and strategic process, and his choices may prove surprisingly effective in getting things done. Whether you like it or not. Do read the whole thing.

Trump Names Kellyanne Conway Counselor To The President - President-elect Donald Trump announced on Thursday morning that Kellyanne Conway, his former campaign manager who stepped in halfway through the presidential campaign to boost Trump's victory chances, will serve as counselor to the president when he takes office denying speculation that Conway would have no role in the incoming administration. According to the statement released by Trump's transition team, Conway will continue her role as a close adviser to the president-elect, working with senior leadership to "effectively message and execute the Administration's legislative priorities and actions."

Judge Napolitano Discusses Supreme Court Vacancy With Trump | Fox Business: President-elect Donald Trump has been busy since Election Day carefully choosing members who will fill his cabinet. But in the midst of the rush to staff his administration, Trump took time for advice from Fox News Senior Judicial Analyst, Judge Andrew Napolitano. The judge outlined desirable qualities for a potential nominee who could fill an empty Supreme Court seat vacated by Justice Antonin Scalia who died in February.The judge advised the president-elect on how to scope out the best candidates based on intellectual, ideological, and temperamental qualities. “He was interested in a broad range of ideas and attitudes about the type of person who would best fill Justice Scalia’s seat,” Napolitano told the FOX Business Network’s Stuart Varney.

Trump’s SEC may take aim at corporate disclosure - Donald Trump will have a unique opportunity to reshape the agenda of the Securities and Exchange Commission, and the next president’s picks may use their new power to take aim at corporate disclosure. Trump will have the opportunity not just to pick a new chairman but two commissioners (though one will have to be a Democrat) on the five-person panel. Several media reports now point to Debra Wong Yang, a former federal prosecutor in California and now a partner at law firm Gibson, Dunn & Crutcher, as Trump’s top pick to run the Securities and Exchange Commission. Thaya Brook Knight, the Cato Institute’s associate director of financial regulation studies told MarketWatch, “Typically presidents select only the chair when they first take office. If Yang is indeed the new SEC chairman, I would expect to see a continued focus on enforcement, given her background as a prosecutor.” A former judge and federal prosecutor in California, Yang now represents white-collar defendants. At Gibson Dunn, Yang was part of a team of lawyers that cleared New Jersey Governor Chris Christie of wrongdoing over the lane-closing scandal. Republicans have consistently complained about the SEC’s supposedly growing corporate disclosure requirements. Andrew Green, a managing director at the Center for American Progress, told MarketWatch, “All signs point to a Trump SEC that will kowtow to the demands of the hard-core deregulation crowd.”

Trump plots two-for-one assault on Obama regs - President-elect Donald Trump is setting out to gut the Obama administration’s regulations, starting with a mandate that would slowly chip away at the number of rules on the books. In a video message mapping out his first 100 days, Trump said he would issue an executive order stating that for every new rule issued, two must be eliminated.The president-elect has decried the regulations that he says have hurt businesses and the economy, particularly those aimed at the environment. And Republicans in Congress are eager to help him roll back many of President Obama’s regulations.“One of the keys to unlocking growth is scaling back years of disastrous regulations unilaterally imposed by out-of-control bureaucrats,” Trump said during a September speech at the Economic Club of New York. “Regulations have grown into a massive, job-killing industry – and the regulation industry is one business I will absolutely put to an end on day one.” It’s unclear how such a two-for-one arrangement would be carried out, but the proposal is raising hopes among those who are calling for deregulation. “Rules have compounded for decades with very little rollback ever taking place, so it is a reasonable request that any time an agency issues a regulation, it should remove a similar magnitude regulatory burden (or, better, two) somewhere else,” Clyde Wayne Crews Jr., policy director of the libertarian Competitive Enterprise Institute, said in an op-ed in Forbes last month. But Crews worries the requirement will only work on the periphery – getting rid of things like paperwork and forms instead of major rules.

Icahn tapped as Trump's special adviser on regulatory issues | Reuters: Billionaire Carl Icahn will advise Donald Trump on rescinding what the activist investor called "excessive regulation" on U.S. businesses, the president-elect's transition team announced on Wednesday. Icahn will serve as a special adviser, not a federal employee, and he will not have specific duties, Trump's team said in a statement. He will not take a salary, a transition aide said. The pick could draw scrutiny because Icahn, whose major investments include insurer American International Group and oil refining business CVR Energy, could help shape rules meant to police Wall Street and protect the environment. In the transition team statement released on Wednesday, Icahn said it was time to "break free of excessive regulation" and let businesses create jobs. Icahn, an early supporter of Trump's White House bid who has at times been outspoken about regulation, has already helped the transition team weigh candidates to lead the Securities and Exchange Commission. He has held meetings at his New York City office, not far from Trump Tower but away from reporters staked out there, people familiar with the talks said. Current SEC Chair Mary Jo White will leave in January. Candidates to replace her have included former SEC Commissioner Paul Atkins and Debra Wong Yang, a former federal prosecutor, a source familiar with the matter said.

Trump to Name Carl Icahn as Adviser on Regulatory Overhaul - Billionaire investor Carl Icahn on Wednesday was named special adviser to the president on overhauling federal regulations. Mr. Icahn, who has spent the past four decades battling big companies as an activist investor, already has been wielding influence in President-elect Donald Trump’s transition team. He is playing a central role in selecting the next chairman of the Securities and Exchange Commission, people familiar with the matter said. Interested candidates have reached out to him, and he is interviewing others at the request of Mr. Trump, the people said. The 80-year-old has played a similar role in identifying Mr. Trump’s choices for other important posts. Mr. Icahn, who controls an oil refiner and has spent months berating the Environmental Protection Agency over a rule he says hurts the industry, helped Mr. Trump vet candidates to run the EPA. He weighed in enthusiastically as Mr. Trump considered whether to nominate Steven Mnuchin and Wilbur Ross to run the Treasury and Commerce departments, respectively. Both men were picked for the jobs. The position isn’t an official government job; Mr. Icahn won’t get paid and won’t have to give up his current business dealings. Yet it is the latest example of a quintessential outsider assuming power as Mr. Trump assembles his cabinet secretaries and advisers Messrs. Trump and Icahn say U.S. businesses have been overregulated in the Obama administration, which they argue is causing them to hold back on investments and is slowing the economy. Mr. Icahn will now be a key player in Mr. Trump’s efforts to loosen the regulatory reins. “I’m involved with Donald where he wants me to be—I believe he respects my views and I think he listens to me,” Mr. Icahn said in an interview with The Wall Street Journal. “What Trump is trying to achieve is to show business in a lot of this country they aren’t going to be ruined by absurd regulation by bureaucrats.” In a statement, Mr. Trump praised Mr. Icahn’s negotiating skills and said “his help on the strangling regulations that our country is faced with will be invaluable.” Since the 1970s, Mr. Icahn has been an outspoken critic of many corporate boards, arguing the corporate-governance system is broken and impedes growth. He is a pioneer among activist shareholders, who buy up stakes and push boards to change direction by selling assets, firing the CEO or buying back shares. An influential role shaping federal regulations marks a new chapter in Mr. Icahn’s influence on Wall Street. It would have been largely unimaginable in his early career as a brash outsider who picked fights with corporate titans. He was derided for years as a corporate raider. He was so feared by companies that they sometimes offered to pay him to go away, a 1980s tactic dubbed “greenmail” that was later restricted.

Where Should Trump Start on China Trade Policy? Visa and Mastercard - President-elect Donald Trump has suggested he wants to impose 45% retaliatory tariffs on China and other trading partners if they cheat on their obligations. To find examples of cheating, he could do worse than to look at China's payment card market. The People's Bank of China's recent directive - to Chinese banks not to renew China UnionPay cards cobranded with foreign networks, such as Mastercard and Visa, forcefully reminds us that China isn't living up to the letter or spirit of its 2001 World Trade Organization commitment to completely open up its domestic payment card market by 2006. China played the U.S. Trade Representative, as well as both the Bush and Obama administrations, for fools. The central bank's directive aims to further disadvantage foreign networks. Payment networks and processors created and domiciled in the U.S., for the moment, rule the roost. But they only have toeholds in China, the world's second-largest electronic payments market. By administrative decree in 2002, the PBOC established China UnionPay – which is owned by banks, the largest of which are state-controlled – as a national card-network champion. The central bank requires that payment cards processing renminbi transactions be cleared through CUP. Moreover, the PBOC establishes system rules and price controls. In 2010, the U.S. finally brought a WTO action against China for flouting its 2001 payment card commitment. In 2012, the U.S. substantially prevailed and China said it wouldn't appeal. Nevertheless, there still hasn't been a single domestic Visa, Mastercard, American Express, Discover or JCB transaction in China. Trump should act early in 2017 to direct tariffs towards China's foreign payment card policy. Doing so would therefore be a high-profile way to make the point with American voters and the Chinese government that he was serious about fair trade policy and about responding to countries that do not honor their obligations.

Investigating the Proposed Overnight Treasury GC Repo Benchmark Rates -- New York Fed - In its recent “Statement Regarding the Publication of Overnight Treasury GC Repo Rates,” the Federal Reserve Bank of New York, in cooperation with the U.S. Treasury Department’s Office of Financial Research, announced the potential publication of three overnight Treasury general collateral (GC) repurchase (repo) benchmark rates. Each of the proposed rates is designed to capture a particular segment of repo market activity. All three rates, as currently envisioned, would initially be based on transaction-level overnight GC repo trades occurring on tri-party repo platforms. The first rate would only include transactions in the tri-party repo market, excluding both General Collateral Finance Repo Service, or GCF Repo®, transactions and Federal Reserve transactions. (GCF Repo is a registered service mark of the Fixed Income Clearing Corporation.) Henceforth in this post, this segment will be referred to as tri-party ex-GCF/Fed. The second rate would build on the first by including GCF Repo trading activity while still excluding Federal Reserve transactions. Finally, the third rate would include tri-party ex-GCF/Fed transactions, GCF Repo transactions, and Federal Reserve transactions. The repo benchmark rates would be calculated as volume-weighted medians, as is currently the case for the production of the effective federal funds rate (EFFR) and the overnight bank funding rate (OBFR), and would be accompanied by summary statistics. The three proposed rate compositions result from staff analysis on the various market segments and characteristic trading behavior, though the New York Fed expects to work with the Board of Governors of the Federal Reserve System to seek public comment on the composition and calculation methodology for these rates before adopting a final publication plan.

Wells Fargo draws senators’ ire on fraud accounts response -- Nine Democratic U.S. senators have scolded the board of directors of Wells Fargo & Co. for the bank’s foot-dragging on disclosing more details on its fraudulent customer accounts. Wells Fargo agreed Sept. 8 to pay a combined $185 million in fines to resolve regulatory complaints regarding 2.1 million customer accounts. In a letter sent Thursday to Wells Fargo Chairman Stephen Sanger, the senators, all members of the Senate banking committee, expressed frustration that the bank has failed to provide requested information to 10 inquiries even after the banking committee’s Sept. 28 grilling of then-top executive John Stumpf. The senators criticized Stumpf for “failing to answer many questions.” (Wells Fargo let Stumpf, its chairman and chief executive, retire immediately on Oct. 12.)The issues the banking committee want to know more about include: officially identifying the independent directors serving on the bank’s internal investigative committee; why such an investigative committee wasn’t in place before the settlement; how it will make its report known to shareholders and the public; what was the board’s knowledge of the scandal before Sept. 8; and what other business lines had been affected by the fraudulent employee behavior. The senators want answers by Jan. 6.“As you know, continued failure to answer questions — especially basic questions — about the causes and consequences of the fraud that Wells Fargo permitted for many years does nothing to restore the trust of Wells Fargo’s customers and shareholders, many of whom are our constituents,” the senators wrote. Analysts say the shadow over the bank will not go away until it discloses more information about the depth of the scandal, and what management and the board knew about it and when they were told. Analysts have questioned whether some board members will be required to step down as part of the rehabilitation process.“In our view, waiting until Spring 2017 to provide more documents and information to our questions is not diligence,” the senators wrote.

Deutsche Bank to Pay $37 Million to End ‘Dark Pool’ Investigations WSJ - Deutsche Bank AG will pay $37 million to end government investigations into how it routed trades to “dark pool” private trading venues, including its own, authorities said Friday. With the settlement, three European banks have agreed to pay a combined $191 million in penalties this year to the New York Attorney General and the Securities and Exchange Commission to close investigations into whether they properly policed their stock-trading platforms. The bank’s settlement with U.S. and New York regulators closes one investigation as the bank also is negotiating with the Justice Department to resolve claims over mortgage securities it sold in the run-up to the financial crisis. Deutsche Bank in September rejected a $14 billion settlement offer from the government in the mortgage probe, and it has since made a settlement counteroffer, according to people familiar with the matter. But the two sides have continued to disagree on key points of a deal, these people said. The government’s offer would have included cash and consumer help to settle that investigation, but the bank said at the time it wouldn’t pay anything near the proposed amount. A deal in that matter could still come together before the end of the Obama administration, some of the people said. One focus of the trading-platform probes has been whether the banks withheld information that might have led clients to route orders elsewhere. Deutsche Bank in its settlement admitted that between January 2012 and February 2014 it misled traders about how it ranked trading venues, including its SuperX dark pool, and how it determined which dark pool it would send an order to, according to agreements with the SEC and New York. . “Misleading and self-serving statements that defraud investors will not be tolerated,” New York Attorney General Eric Schneiderman said.

Authorities Allege $1 Billion Fraud at Platinum Partners - WSJ: In June 2014, the founder of hedge fund Platinum Partners sent a panicked email to his partner. “It can’t go on like this,” wrote Mark Nordlicht, fretting about mounting requests from investors for their money back. “This is code red.” For two more years Platinum pressed on, until federal prosecutors Monday filed a criminal indictment alleging that Mr. Nordlicht and others operated perhaps the largest fraud since Bernard L. Madoff’s Ponzi scheme. Authorities estimated that $1 billion from more than 600 Platinum investors may have been swindled. Mr. Nordlicht was arrested Monday, along with Platinum’s former president, and four others, accused of faking the firm’s performance figures to collect a hefty cut of all investment gains and project a veneer of financial stability. All pleaded not guilty Monday and declined to comment Brooklyn U.S. Attorney Robert Capers described the scheme as “Ponzi-esque.” “Platinum Partners held no more value than a tarnished piece of cheap metal,” Mr. Capers said. Platinum’s collapse caps a stunning fall for a hedge fund that had once boasted of one of the most superlative track records in the hedge-fund world. Its main funds reported no down years and virtually no down months. Mr. Madoff had made similar claims. Paradoxically, Platinum struggled to attract money from skeptical, deep-pocketed professional investors, instead turning time and again to a tightknit group of fellow observant Jewish businesspeople with whom Platinum’s founders were acquainted socially. Little did the investors know, however, that Platinum’s business, which the firm said involved making eclectic investments like loans to bankrupt companies and in thinly traded pharmaceutical stocks, was under fire.In the spring of 2015, Mr. Nordlicht and other Platinum officials “schemed to meet a sudden wave of over $70 million in redemptions,” according to the Securities and Exchange Commission, which Monday filed a parallel civil lawsuit against Mr. Nordlicht and others.Platinum’s then-president, Uri Landesman, who was arrested Monday, coined a phrase for the moment. As he urged investors to stay put, he sent a note to Mr. Nordlicht, saying “Hail Mary time,” according to the SEC.

Morgan Stanley Fined $7.5 Million For Commingling Customer Cash In "Delta One" Desk Trades --On Tuesday, the SEC announced that Morgan Stanley will be fined $7.5 million to settle civil charges that it violated customer protection rules, when it used trades involving customer cash to lower its borrowing costs. The SEC said MS will settle the case without admitting or denying the charges, effectively letting slide a violation which, in an exaggerated format, was exposed as a quasi-criminal offense engaged in by Jon Corzine's now defunct MF Global. Ok so, Morgan Stanley engaged in some creative "commingling" - what's the big deal, most banks do it. What makes this particular case curious is the basis of the commingling: it involves some of the more interesting, and abstract, concepts of modern finance, including Morgan Stanley's "Delta One" trading desk, as well as the rehypothecation of collateral, all of which participated in a complicated violation of customer protection. According to the SEC order, Morgan Stanley's transactions violated the Customer Protection Rule, which prohibits broker-dealers from using affiliates to reduce their customer reserve account deposit requirements.In the SEC’s order, the regulator says that Morgan Stanley had its affiliate, Morgan Stanley Equity Financing Ltd., serve as a customer of its U.S. broker-dealer, a relationship that allowed the affiliate to use margin loans from the U.S. broker-dealer to finance the costs of hedging swap trades with customers. The margin loans lowered the borrowing costs incurred to hedge these swap trades and reduced the U.S. broker-dealer’s customer reserve account deposit requirements by tens to hundreds of millions of dollars per day. The SEC found that Morgan Stanley’s affiliated transactions violated the Customer Protection Rule and that as a result of inaccurately calculating its customer reserve account requirements, it submitted inaccurate reports to the SEC.

Ex-Blackrock Portfolio Manager Sentenced To 12 Months In Prison For Insider Trading -- Former Blackrock star portfolio manager Mark Lyttleton, 45, has been sentenced to 12 months in prison after pleading guilty to an "elaborate web of insider trading, using offshore companies, unregistered mobile phones and cash payments." Lyttleton was arrested at his west London home in 2013 as part of an investigation, known as Operation Rye, by the U.K. Financial Conduct Authority. The ex-portfolio manager, who was based in BlackRock’s London office, ran funds including the BlackRock U.K. Dynamic Fund and the BlackRock U.K. Absolute Alpha Fund, once overseeing as much as 2 billion pounds. The ex-Blackrocker will now spend Christmas behind bars following his sentencing at Southwark Crown Court on Wednesday for insider trading that netted him £45,000 profit. He was also confiscated of £149,000. Lyttleton previously pleaded guilty last month to two counts of insider trading. As the FT adds, he admitted using inside information to trade in the securities of Encore Oil and Cairn Energy in a case brought by the City watchdog, the Financial Conduct Authority. Both those companies were on BlackRock’s list of stocks about which employees had received inside information, the FCA said. Lyttleton’s lawyer Paddy Gibbs said he gleaned the information through overhearing colleagues’ remarks. The court heard that Lyttleton created a complex web of trading via an anonymous bank account, a Swiss-based asset manager, and a Panamanian offshore company of which his wife was the beneficiary. “These offences are premeditated and dishonest. What remains a mystery is why such a successful trader would descend into such criminality,” Zoe Johnson QC for the FCA told the court.

Goldman Sachs to pay $120 million to settle 'jacked' rates case - Goldman Sachs will pay a $120 million (£97 million) penalty to resolve civil charges that it attempted to manipulate a global benchmark for interest rate products known on Wall Street as "ISDAFIX," U.S. derivatives regulators said Wednesday. The case against Goldman Sachs, brought by the Commodity Futures Trading Commission (CFTC), was the latest in a series of broad investigations into manipulation by big banks of a variety of global benchmark rates. To date, the CFTC has imposed penalties of over $5.2 billion (£4.2 billion) stemming from these probes, which include Libor and Euribor, foreign exchange benchmarks, and the US Dollar International Swaps and Derivatives Association Fix, or USD ISDAFIX. A number of banks have also resolved parallel criminal charges related to the manipulation of various global benchmarks. Goldman Sachs, which was also accused by the CFTC of making false reports on the benchmark rate, will settle the case without admitting or denying the charges. "We are pleased to have resolved these matters and have already taken steps to enhance our policies and procedures," bank spokesman Michael DuVally said in a statement. Goldman Sachs is the third bank to settle an ISDAFIX benchmark case with the CFTC. The other two were Barclays in 2015 and Citigroup in 2016

Trump May Have a $300 Million Conflict of Interest With Deutsche Bank - For years, Donald Trump has used a powerful tool when dealing with bankers: his personal guarantee. Now that guarantee -- employed to extract better terms on hundreds of millions of dollars of loans to the Trump Organization -- is at the center of a delicate loan-restructuring discussion at Deutsche Bank AG, which is under investigation on several fronts by the U.S. Department of Justice. The bank is trying to restructure some of Trump’s roughly $300 million debt as part of an attempt to reduce any conflict of interest between the loan and his presidency, according to a person familiar with the matter. Normally, the removal of a personal pledge might lead to more-stringent terms. But there is little normal about this interaction. Trump’s attorney general will inherit an investigation of Deutsche Bank related to stock trades for rich clients in Russia -- where Trump says he plans to improve relations -- and may have to deal with a possible multibillion-dollar penalty to the bank related to mortgage-bond investigations. Whatever terms a restructured loan might include, they will reflect the complex new relationship spawned between Germany’s largest bank and its highest-profile client. Ethicists say this concerns them. “When you have political appointees making decisions about banks that the president owes a lot of money to, it looks terrible,” said Richard Painter, a law professor at the University of Minnesota who was the chief ethics lawyer for President George W. Bush. “The U.S. government is dealing with regulatory and criminal issues with the big banks all the time, and if he owes them a lot of money, there might be an incentive to favor less regulation and less enforcement for the banks.” Deutsche Bank declined to comment. Alan Garten, general counsel of the Trump Organization, said the loans are modest in the context of Trump’s multibillion-dollar empire, and the effort to shift away from a personal guarantee isn’t significant because the loans were structured to become standard debt eventually, following completion of the projects.

Conflicts of Interest Not New to the Age of Trump: Many Politicians Voting for the TARP Bailout Protected Their Own Wealth --Jerri-Lynn here: This post reminds us that conflicts of interest– when politicians or public servants make decisions based on calculations of their own self interest rather than the public interest– is not a phenomenon new or unique to the age of Trump. If you have time, take a look at their complete paper, linked to herein. If you don’t, I particularly enjoyed their dry conclusion from the end of this post:While Congress has recently approved the Stop Trading on Congressional Knowledge Act, purportedly aimed at preventing politicians from taking advantage of non-public information gleaned from their activities as lawmakers, our evidence suggests that politicians don’t have to trade on information to become better off; they also have the ability to pass bills that benefit themselves financially. Researchers in both political science and economics need to look much more closely at this possibility than they have done, so far. Indeed!

Goldman, JPMorgan to invest in blockchain startup Axoni: sources | Reuters: Goldman Sachs Group Inc, JPMorgan Chase & Co and a group of other financial institutions including inter-dealer broker ICAP Plc's venture arm are finalizing an investment in blockchain startup Axoni, people familiar with the deal said this week. The investment will be in a range of $15 million to $20 million, one of the people said. It is expected to be announced this week, said the sources, who spoke on the condition of anonymity because they were not authorized to speak publicly. A representative for Axoni declined to comment on the record when reached by phone. The Axoni deal represents the latest Wall Street effort to gain traction with blockchain, which first emerged as the system underpinning digital currency bitcoin. The technology creates a shared electronic ledger that allows all parties to track information through a secure network, with no need for third-party verification. Wall Street is betting blockchain and similar tools can be used to help slash some of their transaction processing and back-office costs. Axoni is a New York-based technology company that helps banks and other institutions develop blockchain software to run capital markets processes. Over the past six months, it has run a number of high-profile experiments with some of the financial industry’s largest players, in areas such as post-trade processing of credit default swaps and foreign exchange. The Axoni investment comes a month after rival blockchain company R3 CEV reduced the amount it is aiming to raise in a new funding round to $150 million from $200 million.

Wells Fargo Leads Funding Round for Blockchain Startup - The blockchain startup Axoni has raised $18 million in a Series A funding round led by Wells Fargo and Euclid Opportunities, the fintech investment business of the interdealer brokerage ICAP. The raise, which brings Axoni's funding above $20 million, comes as corporate venture capital sources of funding for fintech companies are increasing, while venture capital funding is waning. Goldman Sachs, JPMorgan Chase and Thomson Reuters also participated in the round, along with venture capitalists Andreessen Horowitz, FinTech Collective, F-Prime Capital Partners, and Digital Currency Group, Axoni announced Thursday. Reuters had reported the participation of Goldman and JPMorgan earlier this week, citing anonymous sources, but the full roster of investors was not previously revealed, nor Wells Fargo's lead role.The New York-based Axoni is a capital markets technology firm that specializes in distributed ledger infrastructure. It has spent most of this year collaborating with large financial institutions testing its blockchain and smart contract technology for various use cases. Axoni "has successfully validated this technology in a variety of capital markets use cases," C. Thomas Richardson, head of market structure and electronic trading services at Wells Fargo Securities, said in a press release.

How Far Can 'Challenger' Banks Ride Fintech Charters? -- Fintech, despite all the hand-wringing in recent years, isn't a full competitive threat to banks — yet. For example, fintech companies that have become accomplished consumer lenders are limited in their ability to take deposits or offer wealth management services. But now that the Office of the Comptroller of the Currency has proposed a limited-purpose bank charter for fintechs, they could provide more products and services without the help of bank partners. Will digital startups finally be able to compete head-to-head with banks? It is difficult to predict exactly what will happen since the charter is still in the works, and the OCC declined to speculate further on the nature of the charter ahead of the Jan. 15 deadline for public comment. Experts estimate that it will be a long time before fintechs start putting banks out of business, though pressure could build gradually."A lot of consumers are still very happy with the way they are banking today," said Gilles Gade, the CEO of Cross River Bank in Fort Lee, N.J., which offers back-end services for fintechs. "Especially with community banking — they grab coffee, talk to a banker — that's something that isn't going away anytime soon."Rather, Gade said, it is the money-center banks that are more likely to see competition from "a challenger bank with a sleeker interface." Big banks "have something to worry about, but only from a full-service [digital] solution, not just someone putting out a sleek app," he said. "Big banks already have apps that are pretty slick."

Blockchain Can Cut Out Financial Middlemen - Blockchains are basically a much better way of managing information. They are distributed ledgers, run on multiple computers all over the world, for recording transactions in a way that is fast, limitless, secure and transparent. There is no central database overseen by a single institution responsible for auditing and recording what goes on. If you and I were to engage in a transaction, it would be executed, settled and recorded on the blockchain and evident for all to see, yet encrypted so as to be villain-proof. "The new platform enables a reconciliation of digital records regarding just about everything in real time," write the Tapscotts. No more waiting for that check to clear. It would all be done and recorded for eternity before you know it. The digital currency bitcoin is currently the best-known blockchain technology. If I wanted to pay you using bitcoin, I would start with a bitcoin wallet on my computer or phone and buy bitcoins using dollars. I would then send you a message identifying the bitcoin I would like to send you and sign the transaction using a private key. The heavily encrypted reassignment of the bitcoin to your wallet is recorded and verified in the bitcoin ledger for all to see, and they are now yours to spend. The transaction is likely more secure and cheaper than a traditional bank transfer.. . . The layman might want to wait for a more penetrable explanation of blockchains to come along--as one surely will if the authors' predictions are even one-zillionth right.​ For the full review, see: “Bitcoin Is Just The Beginning; Imagine a personal-identity service that gives us control over selling our personal data. Right now, Google and Facebook reap the profit."

Does Automation Eliminate Bias from Small-Business Lending? - Problem: Though women own a third of U.S. small businesses, they get less than 20% of the loans made through the bank-centric, federally backed system that distributes a lot of credit to such firms. Reasons: Perhaps a combination of biased loan decisions, fear of rejection by traditional lenders and the unique characterstics of women-owned businesses. Emerging solution: Online lending, because it's less intimidating than staring down a loan officer at the local branch, and it holds the promise of more objective credit analyses. Indeed, the early evidence suggests that online applications and automated decisions are adding fairness to the process of granting small-business loans to female entrepreneurs. Online portal SmartBiz analyzes Small Business Administration loan applications on its member banks' behalf and sends them the loans that best match their underwriting policies. Members approve 95% of the loans SmartBiz sends them. Thirty percent of the loans made through SmartBiz go to women-owned businesses. That figure nearly matches their market share: women own 9.8 million small businesses, about a third of the U.S. total. The situation is similar at another small-business-loan portal called Fundera, which accepts loan applications on behalf of traditional SBA lenders and alternative lenders including Funding Circle, Bond Street, Kabbage and OnDeck Capital. One in four Fundera applicants are women, and 25% of loan recipients are women. Traditional bankers should take note, because only 18% of SBA 504 and 7(a) loans were made to women-owned businesses in fiscal year 2016, the agency said. Moreover, only 5.5% of women business owners obtain commercial loans of any kind from banks or other financial institutions to start or acquire their businesses, compared with 11.4% of male business owners, the SBA said.

CFPB's Arbitration Plan Is Likely Dead on Arrival | American Banker: Opposition is lining up against the Consumer Financial Protection Bureau’s arbitration plan. A Republican-controlled Congress is expected to overturn a final rule even as industry groups file lawsuits to stop it from going into effect. Some attorneys think the arbitration rulemaking is already dead on arrival. “The best chance to flat-out stop” the arbitration rule from being finalized would be for the Trump administration to quickly replace CFPB Director Richard Cordray, said one expert.

CFPB Tales Told Out of School -- Adam Levitin - Former CFPB enforcement attorney Ronald Rubin has a lengthy attack on the CFPB in the National Review. It's got lots of sultry details, but there's nothing new and verifiable in the piece. Instead, it's all tales told out of school, unverifiable personal anecdotes by Rubin, who seems to have an particular axe to grind with certain other CFPB staffers, and an ideological one too. Incredibly, Rubin, a former Managing Director for legal and compliance at Bear Stearns, holds up the oft-feckless SEC as a model of good enforcement practice, and criticizes the CFPB for any departures from that practice. The point of the piece seems to be that the CFPB is an agency gone rogue and that this wouldn't have happened if the CFPB had just been structured as a bi-partisan commission. That's hogwash. Assume that everything Rubin claims is true and correct. Even if so, every single problem Rubin identifies in the piece could just as easily have occurred at a bi-partisan commission. ... Rubin's conclusions just don't follow from his non-verifiable personal evidence. Indeed, the very fact that the CFPB hired people like Rubin and Leonard Chanin seems to belie his claims of partisan hiring practices; Rubin is a guy who went from the CFPB to be a Republican staffer for the House Financial Services Committee, after all. Rubin's conclusions do follow from his anti-regulatory world view whose "primary influences were my business-school professors at the University of Chicago, the epicenter of free-market capitalism." Yup.

Banks Fear Coming Fight Over Fed's Excess Reserves – Banks are moving to defend the Federal Reserve's practice of paying interest to member institutions for their excess reserves held in central bank accounts in the face of mounting speculation that the practice will be a target of the next Congress.A report released late Monday by Federal Financial Analytics and sponsored by the American Bankers Association lays out the purpose and advantages of paying interest on excess reserves – a practice known as IOER – as one of the Fed's primary means of affecting monetary policy.Wayne Abernathy, executive vice president of Regulation at the American Bankers Association, said the group is concerned that Congress might take aim at IOER when it convenes in January and committees start crafting legislation to revise Dodd-Frank. While he said there have not been any specific legislative proposals to date, the murmurs are significant enough that banks want to make sure lawmakers know how important the Fed's ability is."We have not seen significant congressional interest in trying to use the IOER interest payments for some sort of congressional project, but there has been occasionally enough chatter on the Hill that demonstrates that there's not really a full understanding of how it all works," Abernathy said. "Our experience is that when legislators don't fully understand something, that's when mistakes happen."Bankers are fearing a redo of events in 2015, when Congress passed a transportation bill that cut the dividend payment that the Fed pays to member banks and directed the remaining surplus – roughly $19 billion – toward an unrelated highway project. Since then there has been talk that Congress could see the interest payments as another source of quick cash, even though the payments don't really work the same way, Abernathy said.

New York Rewriting Cybersecurity Rules After Banker Pushback | American Banker: New York's Department of Financial Services has decided to rethink its controversial cybersecurity regulation just a couple of weeks before it was to take effect. The department says it will publish revised rules Dec. 28 that will take effect March 1. "The delay is a positive step and clear signal that DFS wants to get it right," said Craig A. Newman, a partner with Patterson Belknap Webb & Tyler and chair of the firm's privacy and data security practice group. "The stakes are high given New York's global prominence in the financial community and the fact that other regulators have already sat up and taken notice." The DFS would not elaborate on what will be in the new version of its cybersecurity rules. But the decision to rewrite and reissue the regulation came two days after a hearing in Albany in which New York bankers unleashed a litany of complaints about the regulation to New York State lawmakers. No one from the DFS participated in the hearing. Asked if the DFS wouldn't be an important party to have at the hearing, a department spokesperson laughed but would not comment. New York regulators and lawmakers have jousted in the past. But the DFS was very aware of the hearing and surely listened to the many objections to its regulation that were raised there, which could be distilled down to some basic themes:

1. It would cost too much.

2. Banks shouldn't be forced to hire CISOs. The current proposed rule requires financial institutions to create a chief information security officer position, an executive who reports to the board of directors.

3. The rules are too tough.

4. New York's regulation is too different from the federal rules of FFIEC, Federal Reserve, the OCC, the FDIC and even NIST.

CRE Could Significantly Shape Bankers Strategies in 2017: Bankers are entering a new year feeling a sense of déjà vu about regulatory warnings over commercial real estate concentrations. A decade earlier, regulators were warning that CRE exposure could lead to earnings and capital volatility. While many bankers said those concerns were overblown — arguing that few institutions were in trouble — hundreds of banks ended up failing. Fast forward to today and regulators are expressing similar reservations, warning that areas such as multifamily could become problematic. Bankers, however, say they believe the industry is better equipped to handle an economic shock, pointing to a system with more capital, backstops from borrowers and improved risk management processes. Only time will tell if those views are correct and whether bankers will remain relatively cautious. "You see comments about taking a foot off the gas," said Peter Cherpack, principal of credit technology at Ardmore Banking Advisors. "The enthusiasm for real estate for many bankers is now somewhat tempered." Still, the industry struggles "with bankers who have short memories," Cherpack said. Several banks exceed recommended CRE levels, as a percentage of total risk-based capital, prompting regulators late last year to remind banks of their guidance on concentrations. Regulators prefer that CRE remain below 300% of a bank's total risk-based capital and for construction and land development loans to stay under 100%. Regulators said in a joint statement that "many CRE asset and lending markets are experiencing substantial growth, and that increased competitive pressures are contributing significantly to historically low capitalization rates and rising property values." There is no prohibition for going over those levels, and the numbers aren't considered limits. Banks may still be targeted for more supervisory analysis and, as a result, should implement enhanced risk controls, such as stress testing for CRE portfolios.

In Rare Move, US Sues Barclays For Mortgage Securities Fraud - The market was waiting for the DOJ to announce the long-awaited settlement with Deutsche Bank today. Instead, it got news of a surprise lawsuit filed by the DOJ which sued Barclays after failing to settle a long-running probe into the UK bank's involvement in pre-crisis mortgage fraud. Deutsche Bank and Credit Suisse are in settlement negotiations with the DOJ over similar claims. According to the 198-page lawsuit, the British bank deceived investors about the quality of loans underlying tens of billions of dollars of mortgage securities between 2005 and 2007 and “engaged in a fraudulent scheme to sell tens of billions of dollars of residential mortgage-backed securities (RMBS), in which it repeatedly deceived investors about the characteristics of the loans backing those trusts.’’ The suit also said that the bank “systematically and intentionally misrepresented key characteristics of the loans.” The lawsuit is rare for the big banks, which tend to negotiate a settlement rather than risk a trial, suggesting that Barclays is confident the final lawsuit terms, including protracted legal fees, would be more beneficial to the bank than to settle. As Bloomberg notes, the breakdown in talks suggests that the bank is willing to take its chances with the incoming enforcement officials in the Trump administration. As Bloomberg also added previously, Barclays executives tried to draw the line at $2 billion in settlement charges which made an opening offer it deemed too high. The Justice Department’s starting point for negotiations wasn’t disclosed. At the same time Deutsche Bank is negotiating to lower its own settlement in a similar cash, in which the German bank is hoping to significantly reduce the amount it has to pay from the original DOJ "ask" of $14 billion. Barclays said in a statement that the claims in the lawsuit are "disconnected from the facts" and that it has an obligation to defend against "unreasonable allegations and demands." In terms of demands, Barclays was apparently referring to negotiations with the Justice Department to settle the claims without a case being filed.

Deutsche Bank could settle U.S. penalty this week: source | Reuters: Deutsche Bank could this week agree a penalty with the U.S. Department of Justice over the sale of toxic mortgage debt, one person with direct knowledge of the matter said on Monday. The penalty stems from a 2012 initiative launched by U.S. President Barack Obama, a Democrat, to penalize banks for allegedly selling sub-prime debt while misleading investors about the risks, a practice that contributed to the worst economic crisis since the 1930s. "There is a good chance that the case will be off the table before Christmas," the person said, adding that an announcement could come as early as Wednesday. This would remove the biggest uncertainty facing the bank, which had sought a deal before President-elect Donald Trump, a Republican, takes office on Jan 20. In September, news that Germany's flagship lender faced a penalty of up to $14 billion caused Deutsche's shares to plunge and later prompted the bank to deny speculation that it needed a bailout from Germany. Any last-minute hitch in negotiations could delay an announcement and the person cautioned that a deal was not yet finalised. A spokesman for the Department of Justice declined to comment. Deutsche Bank, which used to be a major player in the U.S. mortgage market, is set to pay far less than the $14 billion penalty the U.S. authorities had initially asked for, the source indicated. Deutsche Bank declined to comment.

Deutsche Bank Settles With DOJ: Will Pay $3.1 Billion Civil Penalty --With analyst expectations/hopes in the $2 to $5 billion range (against the initial $14 billion fine), Deutsche Bank said it has reached settlement with US authorities to pay a $3.1 billion civil penalty (and provide $4.1bn in releief to consumers). Removing considerable uncertainty about Deutsche's capital position, one wonders how much this remarkably low-ball settlement had to do with Donald Trump's current loan re-negotiations with the "world's most systemically dangerous bank."As a reminder, the Wall Street Journal noted that DB's attorneys had privately suggested that a $2 - $3 billion settlement with the DOJ was probably in the ballpark. Meanwhile, wall street analysts had estimated settlements in the $2-$5 billion range. Any fines paid pursuant to current negotiations would be in addition to the $1.9 billion already paid in 2013 to settle other U.S. claims related to mortgage-backed securities.Per the table below, as of June 30, DB had reserved a total of €5.5 billion for civil litigation and regulatory penalties on it's balance sheet.

Deutsche Bank Wins in Stare-Down With Department of Justice Over Mortgage-Backed Securities Liability; Credit Suisse Also Settles While Barclays Holds Out - - Yves Smith - As we’d pointed out in the context of the Security and Exchange Commission’s settlements of private equity regulatory violations, it’s widely recognized that senior members of the agency are in a rush to wrap up outstanding matters before the Trump regime starts. Anyone who has worked on a negotiation knows that if someone is in a rush, they lose a ton of negotiating leverage. The resolution of the Deutsche Bank case is instructive. Oddly, US authorities had apparently leaked that they were seeking a settlement of $14 billion, at a point in time much earlier than they had typically let their ask be known. Historically, these media smoke signals took place after there had been some interaction between the target and the Feds. The early news stories might have been a slip up, or they might have signaled an intent to be bloody-minded. Deutsche’s wee problem was that this was a lot of money, particularly given that the world was finally waking up to the fact that it was a garbage barge. At around the time this story broke, its market cap was down to $18 billion. It had litigation reserves of only €5.5 billion in litigation reserves, which was then equivalent to a bit over $6 billion. We had thought the Department of Justice had a strong hand, and that Deutsche was not likely to get a huge concession on the headline amount, particularly since the way US officials finessed these settlements in the past was to have a large headline figure, but a much smaller hard dollar fine. Given that Deutsche had been patient zero of subprime CDOs and had worked closely with the major subprime shorts, it seemed plausible that the DoJ could make a strong case. The flip side was the German government would not allow Deutsche to be hit so hard that it would start looking wounded. We thought one finesse would be to let the negotiations drag out beyond the German elections….meaning October 2017. But Christmas came early for the German bank in the form of the Trump win. While Trump might view a foreign bank as a cheap target for burnishing his law-enforcement credentials (all the US banks have settled on these issues), it’s now clear that the incoming Administration intends to roll out the red carpet for financiers. The result is Deutsche got off easy. It is only having to pay $3.1 billion in cash (and some of these settlements have been deductible for tax purposes) and another $4.1 billion in promised “consumer relief” as in “stuff maybe we’ll do in the future.”

Credit Suisse to Pay Out $5 Billion Over Toxic Mortgages - Credit Suisse has agreed in principle to pay U.S. authorities $2.48 billion to settle claims it misled investors in residential mortgage-backed securities it sold in the run-up to the 2008 financial crisis, the Swiss bank said on Friday. Credit Suisse will also provide $2.8 billion in consumer relief over five years from the settlement, it said in a statement, adding the deal was subject to negotiation of final documentation and approval by its board of directors.“Credit Suisse will take a pre-tax charge of approximately $2 billion in addition to its existing reserves against these matters. This will be taken in our 4Q 2016 financial results,” it added.The final deal is in line with the $5 billion-$7 billion the U.S. Department of Justice (DOJ) had asked Credit Suisse to pay earlier in negotiations, as reported by Reuters on Monday. The news came after Deutsche Bank agreed to a $7.2 billion settlement with the DOJ over its sale and pooling of toxic mortgage securities.The deals highlight the Justice Department’s efforts to hold European banks accountable for shoddy securities that contributed to the U.S. housing market collapse. The department sued Barclays on Thursday over similar claims. Credit Suisse had paid a $2.8 billion fine in 2014 for helping wealthy Americans evade tax. Credit Suisse in November said it had upped litigation provisions by 357 million francs ($348.29 million), mainly in connection with mortgage-related matters.

Why Lenders Should Embrace Alternative Credit Scores - It may take time and regulatory easing for depositories to emulate organizations like SoFi in transitioning to a "FICO-free" credit scoring model, but there is definite merit in leveraging alternative models to tap into a significantly underserved (yet creditworthy) segment of the population. Developing an alternative credit score or leveraging existing models enables a lender to penetrate this overlooked market and gain new consumers at a time of increased competition and reduced profit margins. Heightened regulations have increased compliance costs for traditional lending institutions, driving capital constraints and reducing spending for revenue-generating technology projects. This has created an opportunity for new entrants to the market, such as Zest Finance and SoFi; online lenders who are less constrained by regulations since they are nondepository institutions. These new market entrants are leading the steep increase in peer-to-peer lending by utilizing alternative credit scoring models to provide access to funds to underserved small businesses and individuals. An Experian study estimated that 64 million consumers in the United States do not have a FICO credit score. Further, Vantagescore assessed 10 million of these so-called "unscoreable" consumers as prime or near-prime consumers, while another significant percentage have steady jobs and/or low liability levels. Clearly, there is a need to determine creditworthiness outside of the traditional models. Organizations like ScoreLogix, which relies on employment and income date for specific zip codes, and Lenddo, which uses Facebook profiles, are examples of new entrants filling the gap in alternative credit scoring analysis. Existing credit bureaus such as Experian and TransUnion have responded by developing their own alternative credit scoring models. Similarly, larger financial institutions are also increasing investment in their own custom models based on alternate data as a supplement to traditional FICO scores.

It's Time for an Office of National Housing Policy | Bank Think: The Executive Office of the President should create a new office, aptly named the Office of National Housing Policy, to be tasked with developing a unified and collaborative approach to our nation's housing policy, including homeownership and subsidized rental housing. The prevailing view within the mortgage industry is there is little collaboration within the federal government in relation to housing policy and rules promulgation. Despite the government controlling 90% of the residential mortgage market (and almost the entire subsidized rental market), the next president will inherit a tangled web of agencies that provide market liquidity, offer mortgage insurance and ensure regulatory oversight. Roles and responsibilities of the current, disparate housing-related agencies are distinct and exist in silo-based structures. No unified command in our housing sector exists; to the contrary, one portion of the government heaps new rules onto the lending community, while others wait in the wings ready to pounce and prove their enforcement prowess. To address competitive overlap amongst government entities this country could use a Housing Policy Czar — a person (and office) charged with developing, disseminating and enforcing a coordinated, collaborative housing policy and finance strategy that considers the capabilities and strengths of each independent agency.

Did Ginnie Just Eliminate a Major Hurdle to MSR Financing?: Some Ginnie Mae issuers and warehouse lenders have been gun-shy about entering financing arrangements for mortgage servicing rights because of concerns about the legal agreements Ginnie requires them to sign in the event that issuers become troubled. But Ginnie has been making some changes to try to dispel those fears. The government mortgage-backed securities guarantor recently finalized a clarification of the so-called acknowledgement agreements in response to feedback from issuers, warehouse lenders who provide MSR financing and their attorneys. "They just felt like we had this incredible power, that we could really take servicing away from [warehouse lenders] without really giving them the opportunity to really just step in and take over the responsibilities for the issuer," Ginnie Mae President Ted Tozer said. "We really tried to indicate to them that all we really care about is the fact that when an issuer gets into financial trouble, we need to make sure somebody's going to be willing to make that next monthly bond payment." The clarification, which acknowledges Ginnie's position and rights in MSR financings, was more about offering reassurances than making a major policy shift, Tozer said. "A lot of it was misunderstandings," he said. "Our intent was not as clear as it could have been in the document."

Boost the Economy by Scrapping the GSEs: Get comfortable with the new word of the day: deregulation. The prominence of private equity barons in the incoming administration, however, cautions against optimism on a general halt to the spread of quasi-government guarantees with their troubling implications for the economy. They distort the flow of capital away from the real growth opportunities. "Deregulation" conjures up a bonfire of the onerous rule books across many industrial sectors, decrees authored with scant or no congressional oversight. There is a second track of deregulation of equal, or even greater, importance which will boost prosperity: the scrapping of quasi-government guarantees applied to various forms of policy-favored credits, including the growing private-public partnerships active in infrastructure projects. The GSEs provide another prominent case of policy-favored credits in point. Scrapping the GSEs would mean credit terms for housing finance could be differentiated according to quality. While mortgage costs would modestly rise compared to the present subsidized levels — many potential homeowners would find that cost more than offset by the cheaper price of their dwelling. Most importantly, general prosperity would gain from the better allocation of capital between housing and other investment opportunities. During the long interest income famine generated by nonconventional monetary policy, bonds enjoying some degree of officially provided "comfort" albeit without explicit government guarantee have attracted a vast global demand at thin margins. GSE bonds are an example of this phenomenon.

Mnuchin Faces Heat From Democrats on OneWest Foreclosures -- Treasury Secretary nominee Steven Mnuchin is facing growing pressure from Senate Democrats to account for his leadership of a bank accused of shoddy foreclosure practices. Senator Sherrod Brown of Ohio, the top Democrat on the banking committee, sent a letter on Wednesday to the Treasury nominee, asking him to detail his views on issues including fair lending laws and foreclosure-prevention programs. Brown, who asked Mnuchin to respond to 11 questions by Jan. 6., says the nominee’s record on other issues related to the committee’s purview, which includes economic sanctions and financial regulations, are also unknown. “Working people need a Treasury Secretary who will work for them, not Wall Street,” Brown said in a statement. “The American public deserves to know where Mr. Mnuchin stands on the important housing and finance issues that he will oversee. While he made a fortune from the financial crisis, far too many Ohioans have yet to recover from it.” While Mnuchin can count on the support of the Republican majority in the Senate for confirmation, Democrats have signaled a tough fight. The former Goldman Sachs Group Inc. partner profited from the 2007-2008 housing market crash when he and a group of investors bought a failed mortgage lender that was later renamed OneWest Bank. It was accused of unfair foreclosure practices and avoiding business in minority neighborhoods. Mnuchin has said he’s proud of his leadership of the bank, which was bought by CIT Group Inc. in 2015. He extended an invitation to meet Brown several weeks ago, but the senator hasn’t yet accepted, according to the Treasury nominee’s spokeswoman, Tara Bradshaw. “Mnuchin looks forward to the confirmation process and to meeting Senator Brown to discuss issues important to the senator,” she said.

AG files lawsuit against alleged deceptive foreclosure consultants -- New Mexico Attorney General Hector Balderas filed a lawsuit in U.S. District Court on Tuesday against a group of California companies and individuals he claims are preying on New Mexicans facing foreclosure. The complaint alleges the companies have violated state and federal consumer protection laws by sending deceptive mass mailings to more than 4,400 New Mexico homeowners offering foreclosure relief and loan modification. The mailers were intended look like official government communication and used the logo “Keep Your Home New Mexico” to trick homeowners into believing they came from a program by the same name that was created by the Attorney General’s Office in response to the foreclosure crisis of 2008, the suit says. “The foreclosure crisis of 2008 created a new category of predators calling themselves ‘foreclosure consultants’ and ‘mortgage modification’ companies,” according to the complaint. “States around the country, including New Mexico, have enacted laws to prohibit such companies from charging upfront fees in advance of their delivery of service.” But, the complaint says, charging upfront fees for assisting consumers in applying for loan modifications was exactly what the defendants were doing in New Mexico. They’ve also failed to include legally required disclosures and notices in their mailings, such as information about consumers’ rights to withdraw from agreements, according to the complaint. The suit — which alleges violations of the federal Mortgage Assistance Relief Services Rule, the New Mexico Mortgage Foreclosure Consultant Fraud Prevention Act and the New Mexico Unfair Practices Act — names 10 defendants, all operating out of California.

Foreclosure Starts Increase 7% in November: Black Knight: Foreclosure starts increased nearly 7% in November from the previous month, but when compared to the previous year, they were down by over 9%, according to Black Knight Financial Services' First Look report. There were 60,400 foreclosure starts in November, compared with 58,500 for October. Still, foreclosure starts remain near their 10-year-low level, Black Knight said. But for the fourth consecutive month, there was an increase in the percentage of loans 30 days or more past due but not in foreclosure. For November, the total delinquency rate was 4.46%, up from 4.35% in October. This is "a relatively mild seasonal increase by historical standards," Black Knight said in a press release. For the first time in 10 years, the number of loans in active foreclosure is under 500,000, at 498,000. This is 6,000 less than in October and 200,000 less than in November 2015. The five states which had the largest growth over the past sixth months in the total number of foreclosures and delinquent mortgages are Louisiana, up 10.59%; Wyoming, up 10.08%; South Dakota, up 8.34%; Nebraska, up 7.89; and Iowa, up 7.45%.

• Delinquency rate up by 2.5 percent, a relatively mild seasonal increase by historical standards
• Annual improvement in mortgage delinquency rates is beginning to slow as market "normalizes"
• Number of loans in active foreclosure drops below 500K for the first time in nearly 10 years
• Pre-payment activity remains strong, for now, as applications made prior to the rise in interest rates continue to close

According to Black Knight's First Look report for November, the percent of loans delinquent increased 2.5% in November compared to October, and declined 9.4% year-over-year.
The percent of loans in the foreclosure process declined 1% in November and were down 29% over the last year. Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 4.46% in November, up from 4.35% in October.The percent of loans in the foreclosure process declined in November to 0.98%. The number of delinquent properties, but not in foreclosure, is down 228,000 properties year-over-year, and the number of properties in the foreclosure process is down 200,000 properties year-over-year. Black Knight will release the complete mortgage monitor for November on January 9th.

Smaller Servicers Adding Loans at a Faster Pace: Fitch: Smaller companies that perform servicing are rapidly growing their loan portfolios — and not just in the default servicing space, according to Fitch Ratings. Among U.S. special servicers with fewer than 400,000 loans, loan portfolios grew by nearly 20% year over year, Fitch reported in its latest quarterly U.S. RMBS Servicer Handbook. Comparatively, portfolio growth for all servicers came in at 2% over 2015's figure. And the smaller special servicers aren't limiting their portfolio growth to nonperforming loans — primary serviced loans grew by an average of 52% across their portfolios, Fitch said. "This trend is in line with takeaways from Fitch's recent U.S. RMBS Servicer Roundtable event, in which many servicing executives noted that nonbank special servicers could seek out new origination volume to offset declining delinquent loan volume," Fitch said in a news release. Another trend Fitch found in its report was the increased use of loan modifications by nonbanks as a form of loss mitigation. This method was used in 72% of cases this quarter versus 64.8% a year ago. Fitch also reported that staffing at nonbank servicers fell by 4.3% on average. Banks kept their full-time staffing the same during the quarter, but expanded their temporary staff by 2.7%.

CoreLogic: "Mortgage loans originated in Q3 continued to exhibit low credit risk" - Some credit statistics from CoreLogic: Housing Credit Index: Third Quarter 2016 Loans originated in Q3 2016 are among the highest-quality home loans originated since the year 2001, according to the latest CoreLogic Housing Credit Index (HCI) Report. Figure 1 shows the overall Housing Credit Index from Q1 2001 through the end of Q3 2016. Higher index values indicate a higher level of credit risk for new originations and lower index values indicate less credit risk present. Compared with other loans made since mid-2009, the starting point of the current economic expansion, Q3 2016 loans are among the loans originated with the lowest credit risk based on six important credit-risk attributes. The average credit score for homebuyers increased 5 points between the third quarter of 2015 and the third quarter of 2016, rising from 734 to 739. The average DTI for homebuyers fell slightly comparing the third quarters of 2015 and 2016, falling from 35.7 percent to 35.4 percent. The LTV for homebuyers decreased nearly 1 percentage point between the third quarter of 2015 and the third quarter of 2016, declining from 86.8 percent to 85.8 percent.

New York unveils bill of rights for borrowers facing foreclosure - The state of New York is taking the next step in its fight against abandoned foreclosures and neighborhood blight by unveiling a consumer bill of rights for borrowers facing foreclosure. The consumer bill of rights is part of series of “sweeping” new laws announced by the state earlier this year designed to reform the state’s foreclosure process and address the state’s issues with abandoned foreclosures, also called zombie homes. New York has one of the longest foreclosure timelines in the nation, averaging 1,070 days to foreclose in the third quarter. According to the office of New York Gov. Andrew Cuomo, the new laws combat the blight of vacant and abandoned properties by expediting the rehabilitation, repair and improvement of these properties, and enable the state to assist homeowners facing foreclosure. Additionally, the new laws also impose a pre-foreclosure duty on banks and servicers to maintain zombie homes, create an electronic registry of abandoned properties, and expedite foreclosure for vacant and abandoned properties to get those houses back on the market. The consumer bill of rights, which can be read in full here, reminds consumers of the various rights they have before, during, and after the foreclosure process.First and foremost, the bill of rights tells consumers that they can and should seek the assistance of a lawyer or a housing counselor if they are facing a foreclosure in New York. The bill of rights also tells borrowers that they have the right to stay in their home during the foreclosure process.“You have the right to stay in your home and the duty to maintain your property unless and until a court orders you to vacate,” the bill of right states. “If you abandon your home, the plaintiff (bank or mortgage servicer) may be able to foreclose on your property through an expedited process in court,” the bill of rights continues. “To prevent this outcome, stay in your home and carefully review and respond to documents you receive from the plaintiff or the court in your foreclosure case. A failure to respond or appear in court when required to do so could make it easier for the plaintiff to show that your property is vacant and abandoned, which could put you at risk of an expedited foreclosure.”

Lawler: Table of Distressed Sales and All Cash Sales for Selected Cities in November - Economist Tom Lawler sent me the table below of short sales, foreclosures and all cash sales for selected cities in November.On distressed: The total "distressed" share is down year-over-year in all of these markets. Short sales and foreclosures are mostly down in these areas. The All Cash Share (last two columns) is mostly declining year-over-year. As investors continue to pull back, the share of all cash buyers continues to decline.

FHFA House Price Index Up 0.4% in October - The Federal Housing Finance Agency (FHFA) has released the U.S. House Price Index (HPI) for the most recent month. Here is the opening of the report: U.S. house prices rose in October, up 0.4 percent on a seasonally adjusted basis from the previous month, according to the Federal Housing Finance Agency (FHFA) monthly House Price Index (HPI). The previously reported 0.6 percent increase in September remained unchanged.The FHFA monthly HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. From October 2015 to October 2016, house prices were up 6.2 percent. [Link to report] The chart below illustrates the HPI series, which is not adjusted for inflation, along with a real (inflation-adjusted) series using the Consumer Price Index: All Items Less Shelter.

"Rates Stay Near Highs Despite Market Improvement" - From Matthew Graham at Mortgage News Daily: Rates Stay Near Highs Despite Market Improvement/; Mortgage rates stayed close to the highest levels in more than 2 years today, even though underlying bond markets left plenty of room for improvement. Typically, when bond markets improve as much as they did today, rates would be noticeably lower. The inconsistency has to do with more conservative lender pricing strategies surrounding the holiday season...All this having been said, a few lenders did update rates this afternoon, offering slight improvements. The average effective rate (which adjusts for closing costs) fell just slightly, but the average contract rate for a conventional 30yr fixed loan remained at 4.375% for a top tier scenario, with several lenders still up at 4.5% CR Note: We should see a further drop in refinance activity, and I expect some slowdown in housing (still thinking about this). Here is a table from Mortgage News Daily: Home Loan Rates View More Refinance Rates

Higher Rates Will Slow Home Price Growth in 2017: First American - Higher mortgage rates are expected to put a damper on the housing market's potential along with home price appreciation next year, according to First American Financial Corp.First American predicts that the home price growth rate could decline by nearly a percentage point by the end of next year due to higher mortgage rates, Mark Fleming, the company's chief economist, said in a news release. Existing-home sales are also expected to go down."The 'taper-tantrum' in 2013, which was a larger increase in mortgage rates than we have seen in recent weeks, produced a similar result — a decline in sales activity, but a more pronounced decline in house price appreciation," Fleming said in a news release Monday.Consequently, the rate increases seen recently could lower the market's ability to meet its full potential.In November, First American assessed that potential existing-home sales increased 4% year over year to a seasonally adjusted annualized rate of 6.1 million properties. The market underperformed this potential last month by 8.4% or 515,000 sales at a seasonally adjusted annualized rate, an improvement from the underperformance gap of 8.6% in October. "The market potential for existing-home sales continues to grow based on the strength of the broader economy, particularly wage growth, as well as improving access to credit," Fleming said. "But, the market continues to underperform its potential, primarily a result of persistently tight inventory."

Mortgage Rates Surge To 31-Month High, Sending US Home Affordability To 8-Year Lows -- One week after Freddie Mac chief economist Sean Becketti warned that "if rates continue their upward trend, expect mortgage activity to be significantly subdued in 2017", mortgage rates continued their upward trend. According to the latest update from the mortgage giant, the 30-year fixed reached 31-month highs, touching level not seen since April 2014 in the week after the Fed hiked its interest rate for the second time in the past decade. The average rate for a 30-year fixed mortgage was 4.3%, up from 4.16% last week, Freddie Mac said in a statement Thursday. The average 15-year rate climbed to 3.52%, the highest since January 2014, from 3.37%. Mortgage rates have surged since October, when the 30 Year fixed was offered at 3.40%, tracking a jump in Treasury yields on expectations of rising inflation. Freddie Mac's chief economist Becketti was more sanguine after last week's unexpected warning, saying that “a week after the only rate hike of 2016, the mortgage industry digested the Fed’s decision. Following Yellen's speech last Wednesday, the 10-year Treasury yield rose approximately 10 basis points. The 30-year mortgage rate rose 14 basis points to 4.30 percent, reaching highs we have not seen since April 2014." So what does this surge in yields mean? According to a separate analysis released by RealtyTrac, home affordability in the fourth quarter tumbled to the lowest level since the financial crisis, Q4 2008. In a nutshell the report found that:

29% of Local Markets Less Affordable Than Historic Norms, Highest Since Q3 2009;

Affordability Falls to Lowest Level in Eight Years: Attom: A consumer's ability to afford to purchase a home during the fourth quarter was at its lowest level in eight years due to rapid price appreciation, moderate wage growth and the post-election increase in interest rates, said Attom Data Solutions. Nationally, the affordability index in the fourth quarter was 103, down from 108 in the third quarter and down from 116 a year ago to the lowest level since the fourth quarter of 2008, when the national home affordability index was 102. And the trend is likely to get worse next year, said Daren Blomquist, senior vice president at Attom, in a press release. "The prospect of further interest rate hikes in 2017 will likely cause further deterioration of home affordability next year. Absent a strong resurgence in wage growth, that will put downward pressure on home price appreciation in many local markets," he said. A growing number of markets across the country were already feeling an affordability pinch. Of the 447 counties Attom looked at, 29% were less affordable than their historic average. This was up from 24% in the third quarter and 13% in the fourth quarter of 2015. Of the five counties with the largest population that are least affordable, two were in New York City: Kings County (Brooklyn), with an affordability index of 91, and Queens County at 95. Another pair was Texas neighbors Dallas County at 91 and Tarrant County (Fort Worth) at 93. Finally there was Alameda County, Calif., in the East Bay part of the Bay Area, at 93.

MBA: Mortgage Applications Increase in Latest Weekly Survey - From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications increased 2.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 16, 2016. .. The Refinance Index increased 3 percent from the previous week. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index decreased 0.1 percent compared with the previous week and was 1 percent higher than the same week one year ago. ..The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to its highest level since May 2014, 4.41 percent, from 4.28 percent, with points increasing to 0.38 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index since 1990. With the current level of mortgage rates, refinance activity will probably decline further. The second graph shows the MBA mortgage purchase index. The purchase index was "1 percent higher than the same week one year ago". Even with the increase in mortgage rates, purchase activity is still holding up. However refinance activity has declined significantly - and will probably decline further.

Existing Home Sales increased in November to 5.61 million SAAR --From the NAR: Existing-Home Sales Forge Ahead in NovemberTotal existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 0.7 percent to a seasonally adjusted annual rate of 5.61 million in November from a downwardly revised 5.57 million in October. November's sales pace is now the highest since February 2007 (5.79 million) and is 15.4 percent higher than a year ago (4.86 million). ... Total housing inventory at the end of November dropped 8.0 percent to 1.85 million existing homes available for sale, and is now 9.3 percent lower than a year ago (2.04 million) and has fallen year-over-year for 18 straight months. Unsold inventory is at a 4.0-month supply at the current sales pace, which is down from 4.3 months in October. This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in November (5.61 million SAAR) were 0.7% higher than last month, and were 15.4% above the November 2015 rate. Note: Sales in November 2015 were depressed for one month by a change in regulations, so the year-over-year gain was very strong. The second graph shows nationwide inventory for existing homes. According to the NAR, inventory decreased to 1.85 million in November from 2.01 million in October. Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Existing-Home Sales Continue to Climb --This morning's release of the November Existing-Home Sales increased from the previous month to a seasonally adjusted annual rate of 5.61 million units from a downwardly revised 5.57 million in October. The Investing.com consensus was for 5.50 million. The latest number represents a 0.7% increase from the previous month and a 15.4% increase year-over-year. Here is an excerpt from today's report from the National Association of Realtors. Lawrence Yun, NAR chief economist, says it's been an outstanding three-month stretch for the housing market as 2016 nears the finish line. "The healthiest job market since the Great Recession and the anticipation of some buyers to close on a home before mortgage rates accurately rose from their historically low level have combined to drive sales higher in recent months," he said. "Furthermore, it's no coincidence that home shoppers in the Northeast — where price growth has been tame all year — had the most success last month." [Full Report] For a longer-term perspective, here is a snapshot of the data series, which comes from the National Association of Realtors. The data since January 1999 was previously available in the St. Louis Fed's FRED repository and is now only available from January 2013. It can be found here.

December 2016 Chemical Activity Barometer Ends Year Strongly: The Chemical Activity Barometer (CAB) ended the year on a strong note, posting a monthly gain of 0.3 percent and a year-over-year gain of 4.4 percent, a significant improvement over the first half of the year, and a pace not seen since September 2010. All data is measured on a three-month moving average (3MMA). On an unadjusted basis the CAB climbed 0.6 percent in December, and 4.8 percent for the year. Noted ACC Chief Economist Kevin Swift: Housing starts were at a nine-year high. The foundation remains strong. Overall trends in construction-related resins, pigments, and related performance chemistry were positive and suggest further gains in housing next year. Other indicators, including equity prices, product prices, and inventory were also positive. The Chemical Activity Barometer has four primary components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators. In December all of the four core categories for the CAB improved. Production-related indicators were positive, despite last week's announcement that housing starts tumbled.

November 2016 Headline Existing Home Sales Big Increase: The headlines for existing home sales improved and say "a big surge in the Northeast and a smaller gain in the South pushed existing-home sales up in November for the third consecutive month". Our analysis of the unadjusted data agrees - and the quantity of home sales this month are nearly back to pre-Great Recession levels.. This was a great month for existing home sales. I think this surge was do to anticipation of higher mortgage interest rates and not a harbinger for future elevated sales. Still, it is good news for home sellers. Econintersect Analysis

The homes for sale inventory significantly declined this month, and remains historically low for Novembers, and is down 9.3 % from inventory levels one year ago).

Sales up 0.7 % month-over-month, up 15.4 % year-over-year.

Prices up 6.8 % year-over-year

The market expected annualized sales volumes of 5.400 M to 5.650 million (consensus 5.350 million) vs the 5.61 million reported.

The graph below presents unadjusted home sales volumes. Here are the headline words from the NAR analysts: Lawrence Yun, NAR chief economist, says it's been an outstanding three-month stretch for the housing market as 2016 nears the finish line. "The healthiest job market since the Great Recession and the anticipation of some buyers to close on a home before mortgage rates accurately rose from their historically low level have combined to drive sales higher in recent months," he said. "Furthermore, it's no coincidence that home shoppers in the Northeast — where price growth has been tame all year — had the most success last month.""Existing housing supply at the beginning of the year was inadequate and is now even worse heading into 2017," added Yun. "Rental units are also seeing this shortage. As a result, both home prices and rents continue to far outstrip incomes in much of the country." First-time buyers in higher priced cities will be most affected by rising prices and mortgage rates next year and will likely have to stretch their budget or make compromises on home size, price or location," said Yun.

A Few Comments on November Existing Home Sales -- Several key points:
1) The strong year-over-year increase was related to the implementation of the new TILA-RESPA Integrated Disclosure (TRID) in November 2015. Note: TILA: Truth in Lending Act, and RESPA: the Real Estate Settlement Procedures Act of 1974. The impact from TRID sorted out quickly (sales rebounded from 4.86 million SAAR in November 2015 to 5.45 million SAAR in December 2015) SAAR: Seasonally Adjusted Annual Rate.
2) These November existing home sales were mostly in escrow - with mortgage rates locked - before the recent increase in mortgage rates (rates started increasing after the election).
With the recent increase in rates, I'd expect some decline in sales volume as happened following the "taper tantrum" in 2013. So we might see sales fall to 5 million SAAR or below over the next 6 months. That would still be solid existing home sales. We might also see a little more inventory in the coming months, and therefore less price appreciation.
Usually a change in interest rates impacts new home sales first, because new home sales are reported when the contract is signed, whereas existing home sales are reported when the contract closes. So we might see some impact on new home sales for November or December.
3) As usual, housing economist Tom Lawler was much closer to the NAR reported sales than the consensus. Lawler forecast 5.60 million SAAR, the NAR reported 5.61 million. The consensus was 5.53 million.
4) On inventory, I expected some increase in inventory, but that didn't happened. Inventory is still very low and falling year-over-year (down 9.3% year-over-year in November). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.
Two of the key reasons inventory is low: 1) A large number of single family home and condos were converted to rental units. Last year, housing economist Tom Lawler estimated there were 17.5 million renter occupied single family homes in the U.S., up from 10.7 million in 2000. Many of these houses were purchased by investors, and rents have increased substantially, and the investors are not selling (even though prices have increased too). Most of these rental conversions were at the lower end, and that is limiting the supply for first time buyers. 2) Baby boomers are aging in place (people tend to downsize when they are 75 or 80, in another 10 to 20 years for the boomers). Instead we are seeing a surge in home improvement spending, and this is also limiting supply.

New Home Sales increase to 592,000 Annual Rate in November --The Census Bureau reports New Home Sales in November were at a seasonally adjusted annual rate (SAAR) of 592 thousand. The previous three months were revised down slightly. "Sales of new single-family houses in November 2016 were at a seasonally adjusted annual rate of 592,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 5.2 percent above the revised October rate of 563,000 and is 16.5 percent above the November 2015 estimate of 508,000."The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate. Even with the increase in sales over the last several years, new home sales are still fairly low historically. The second graph shows New Home Months of Supply. The months of supply decreased in November to 5.1 months. The all time record was 12.1 months of supply in January 2009. This is now in the normal range (less than 6 months supply is normal). Starting in 1973 the Census Bureau broke inventory down into three categories: Not Started, Under Construction, and Completed. The third graph shows the three categories of inventory starting in 1973. The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate). In November 2016 (red column), 41 thousand new homes were sold (NSA). Last year, 36 thousand homes were sold in November. This was the highest sales for November since 2007.

November New Home Sales Up 5.2% MoM, Surprises Expectations --This morning's release of the November New Home Sales from the Census Bureau came in at 592K, up 5.2% month-over-month from 563K in October. Seasonally adjusted estimates for August, September, and October were revised. The Investing.com forecast was for 575K. Here is the opening from the report:Sales of new single-family houses in November 2016 were at a seasonally adjusted annual rate of 592,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 5.2 percent (±14.1%)* above the revised October rate of 563,000 and is 16.5 percent (±19.3%)* above the November 2015 estimate of 508,000. The median sales price of new houses sold in November 2016 was $305,400; the average sales price was $359,900. The seasonally adjusted estimate of new houses for sale at the end of November was 250,000. This represents a supply of 5.1 months at the current sales rate. [Full Report] For a longer-term perspective, here is a snapshot of the data series, which is produced in conjunction with the Department of Housing and Urban Development. The data since January 1963 is available in the St. Louis Fed's FRED repository here. We've included a six-month moving average to highlight the trend in this highly volatile series.

November 2016 Headline New Home Sales Improve: The headlines say new home sales improved. The median sales price for homes insignificantly improved. The unadjusted data shows this was not as strong of month as last month but the upward trend of home sales remains in play. Analyst Opinion of New Home Sales This data series is suffering from methodology issues which manifest as significant backward revision - and this month the revisions were moderately downward. Home sales move in spurts and jumps - so this is why we view this series using a three month rolling average (rolling averages improved}. Overall I view this as an OK report, which was slightly above market expectations. Dispite the fact the data jumps around, the three month rolling averages have been solidly improving since mid 2016.

unadjusted sales growth decelerated 1.5 % month-over-month.

unadjusted year-over-year sales up 13.9 %.. Year-over-year growth rate this month was well above the range of growth seen last 12 months.

The quantity of new single family homes for sale remains well below historical levels.

New Home Sales Jump Ahead Of Mortgage Rate Spike Led My Midwest Surge --Soaring homebuilder confidence, crashing mortgage applications, spiking mortgage rates,weak pending home sales, strong existing home sales, and now new home sales for November surged 5.2% MoM (smashing expectation of a 2.1% rise). Take your pick of the US housing 'recovery' narrative.The jump to 592k SAAR new home sales in November (from an unrevised 575k) obviously lags the spike in mortgage rates and collapse in mortgage applications...The jump in sales was dominated by a 43.8% spike MoM in The Midwest, but The South saw new home sales drop MoM for the 4th month in a row. The median price rose to $305,400, but remains slightly below September's record high...

A few Comments on November New Home Sales – McBride - New home sales for November were reported at 592,000 on a seasonally adjusted annual rate basis (SAAR). This was above the consensus forecast, however the previous months combined were revised down slightly. Sales were up 16.5% year-over-year in November, and this is the best month for November (NSA) since 2007. And sales are up 12.7% year-to-date compared to the same period in 2015. This is very solid year-over-year growth. Note that these sales (for November) mostly happened while mortgage rates were increasing (but still below the current level). So far the increase in rates hasn't impacted sales, but we need to wait a few months to see the impact.This graph shows new home sales for 2015 and 2016 by month (Seasonally Adjusted Annual Rate). Sales to date are up 12.7% year-over-year, because of very strong year-over-year growth over the last seven months. Overall I expected lower growth this year, in the 4% to 8% range. Slower growth seemed likely this year because Houston (and other oil producing areas) will have a problem this year. I was too pessimistic on new home sales this year. And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales. Now I'm looking for the gap to close over the next several years.The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through November 2016. This graph starts in 1994, but the relationship had been fairly steady back to the '60s. Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales. I expect existing home sales to move more sideways, and I expect this gap to slowly close, mostly from an increase in new home sales.

AIA: Architecture Billings Index indicates "small gain" in November -- This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment. From the AIA: Architecture Billings Index ekes out another small gain Coming off a modest increase after two consecutive months of contraction, the Architecture Billings Index (ABI) recorded another small increase in demand for design services. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the November ABI score was 50.6, essentially unchanged from the mark of 50.8 in the previous month. This score reflects a slight increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.5, up from a reading of 55.4 the previous month.
• Regional averages: South (51.3), Midwest (50.9), Northeast (50.8), West (48.6)
• Sector index breakdown: multi-family residential (51.7), mixed practice (51.3), commercial / industrial (50.4), institutional (49.5)
This graph shows the Architecture Billings Index since 1996. The index was at 50.6 in November, down from 50.8 in October. Anything above 50 indicates expansion in demand for architects' services. This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.
According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. This index was positive in 9 of the last 12 months, suggesting a further increase in CRE investment through mid-2017.

Hotels: Strong Finish to 2016, Could be Best Year Ever - From HotelNewsNow.com: STR: US hotel results for week ending 10 December The U.S. hotel industry reported positive results in the three key performance metrics during the week of 4-10 December 2016, according to data from STR. In year-over-year comparisons, the industry’s occupancy increased 1.7% to 59.2%, and average daily rate (ADR) was up 3.9% to US$120.12. As a result, revenue per available room (RevPAR) grew 5.7% to US$71.08. STR analysts note that the week’s performance was helped by a comparison to a 2015 week that included the first day of Hanukkah. The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Donald Trump’s Win Sends Economic Optimism to Highest Level Since 2012- Donald Trump’s election pushed confidence in the economy’s direction to its most favorable level since 2012, according to the latest WSJ/NBC News poll.Some 42% of respondents say they believe the economy will get better over the coming year, versus 19% who say it will get worse. The last time Americans were as optimistic about the economy came in October 2012, when 45% saw the economy getting better, compared with just 9% who saw it getting worse.One year ago, some 24% of respondents believed the economy would improve over the following 12 months, equal to the share who believed it would worsen.The upbeat mood is consistent with other gauges of confidence in the economy, which soared in November and December. A survey of CEOs recently said they were optimisticabout Mr. Trump’s policies. Economists see somewhat less risk of recession. In the WSJ/NBC News poll, the improving economic sentiment is driven largely by Republicans’ postelection enthusiasm. Some 68% of Republican voters see the economy improving over the next year, versus 6% who believe it will get worse. Last year, just 14% of Republicans saw the economy improving, compared with 34% who saw it getting worse. Independent voters also believe the economy will improve by a 22-percentage-point margin, a reversal from last year, when independents saw the economy getting worse by a 15-percentage-point margin. Respondents across a range of household-income levels see the economy improving next year, but voters who make more than $50,000 are more likely to have an optimistic outlook on the economy. Men were more likely than women to have an optimistic outlook on the economy.

Michigan Consumer Sentiment: December Final Highest Since January 2004 - The University of Michigan Final Consumer Sentiment for December came in at 98.2, up from the November Final reading and its highest since January 2004. Investing.com had forecast 98.0. Surveys of Consumers chief economist, Richard Curtin, makes the following comments: While the surge in confidence following Trump's surprise election ended by mid December, it nonetheless led to the highest level of the Sentiment Index since January 2004. Compared with the rapid gains made in late November and early December, the Sentiment Index was barely higher than at mid month and barely higher than the January 2015 peak -- in both cases, just two-tenths of a point -- but that small difference was enough to establish a twelve year peak. An all-time record number of consumers (18%) spontaneously mentioned the expected favorable impact of Trump's policies on the economy. This was twice as high as the prior peak (9%) recorded in 1981 when Reagan took office. To be sure, nearly as many consumers referred unfavorably to anticipated changes in economic policies, but those references were less than half as frequent as the peak level recorded just three years ago (16% vs. 37%). Consumers anticipated that a stronger economy would create more jobs, although expected wage gains were quite meager. Smaller income gains were offset by record low inflation expectations. Needless to say, the overall gain in confidence was based on anticipated policy changes, with specific details as yet unknown. Such favorable expectations could help jump-start growth before the actual enactment of policy changes, and form higher performance standards that will be used to judge the Trump presidency. [More...] See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.

U.S. Economic Confidence Surges To The Highest Level That Gallup Has Ever Recorded - Gallup’s U.S. Economic Confidence Index has never been higher than it is today. The “Trumphoria” that has gripped the nation ever since Donald Trump’s miraculous victory on election night shows no signs of letting up. Tens of millions of Americans that were deeply troubled by Barack Obama’s policies over the last eight years are feeling optimistic about the future for the first time in a very long time. And it is hard to blame them, because what we have already seen happen since November 8th is nothing short of extraordinary. The stock market keeps hitting record high after record high, the U.S. dollar is now the strongest that it has been in 14 years, and CEOs are personally promising Trump that they will bring jobs back to the United States. These are things worth getting excited about, and so it makes perfect sense that Gallup’s U.S. Economic Confidence Index has now risen to the highest level that Gallup has ever seen…Americans’ confidence in the economy continues to gradually strengthen after last month’s post-election surge. Gallup’s U.S. Economic Confidence Index averaged +10 for the week ending Dec. 18, marking another new high in its nine-year trend.The latest figure is up slightly from the index’s previous high of +8 recorded in both of the prior two weeks. The first positive double-digit index score since the inception of Gallup Daily tracking in 2008 reflects a stark change in Americans’ confidence in the U.S. economy from the negative views they expressed in most weeks over the past nine years. And of course this booming level of confidence is not just reflected in Gallup’s numbers. As I discussed in a previous article, the mammoth shift in the results of CNBC’s All-America Economic Survey after the election was nothing short of historic…

An Odd Disconnect: Consumer Confidence At 12 Year High As Inflation Expectations Tumble To All Time Lows There is an odd divergence in the latest UMichigan consumer sentiment print: on one hand, the December index of Consumer Sentiment rose from 93.8 in November to 98.2, up from the preliminary 98.0 print, even as long-term inflation expectation, those in the 5-10 year bucket, dropped from 2.50% to 2.30%,a new all time low print. Which is odd, because the very reason for the surge in confidence is due to the recent spike in the market, driven higher by expectations or rising inflation, something which apparently has not filtered through to orderinary US consumers, who instead are hoping to have their Dow Jones 20,000 hat, while basking in the glow of dropping prices and a "deflationary mindset." It wasn't just long-run inflation expectations - the 1-year inflation outlook similarly slipped from 2.3% to 2.3%, the lowest print in 6 years, suggesting that Trump's reflationary policies will fail. According to the report, while the surge in confidence following Trump's surprise election ended by mid December, it nonetheless led to the highest level of the Sentiment Index since January 2004. Compared with the rapid gains made in late November and early December, the Sentiment Index was barely higher than at mid month and barely higher than the January 2015 peak - in both cases, just two-tenths of a point - but that small difference was enough to establish a twelve year peak. An all-time record number of consumers (18%) spontaneously mentioned the expected favorable impact of Trump's policies on the economy. This was twice as high as the prior peak (9%) recorded in 1981 when Reagan took office. To be sure, nearly as many consumers referred unfavorably to anticipated changes in economic policies, but those references were less than half as frequent as the peak level recorded just three years ago (16% vs. 37%).Consumers anticipated that a stronger economy would create more jobs, although expected wage gains were quite meager. Smaller income gains were offset by record low inflation expectations. Needless to say, the overall gain in confidence was based on anticipated policy changes, with specific details as yet unknown. Such favorable expectations could help jump-start growth before the actual enactment of policy changes, and form higher performance standards that will be used to judge the Trump presidency.

November 2016 Personal Income Year-over-Year Growth Weakens: The headline data this month showed statistically insignificant consumer income growth - and consumer spending slightly under expectations. Personal consumption has been the major driver of GDP since the end of the Great Recession. Not only was there no real income growth, but the previous month was revised downward. Spending, however, was still relatively strong which supports GDP. The trend lines keep moving around due to backward revision - so this analysis below likely will be negated with next month's release.

The monthly fluctuations are confusing. Looking at the inflation adjusted 3 month trend rate of growth, disposable income growth rate trend is decelerating while consumption's growth rate is accelerating.

Real Disposable Personal Income is up 2.3 % year-over-year (published 2.7 % last month - now revised to 2.5 %), and real consumption expenditures is up 2.8 % year-over-year (published 2.8 % last month - now revised to 2.9 %)

this data is very noisy and as usual includes moderate backward revision - this month the changes modified the year-over-year trends.

The third estimate of 3Q2016 GDP indicated the economy was expanding at 3.5 % (quarter-over-quarter compounded). Expenditures are counted in GDP, and income is ignored as GDP measures the spending side of the economy. However, over periods of time - consumer income and expenditure grow at the same rate.

The savings rate continues to be low historically, and was down 0.1 % to 5.8 % this month.

The inflation adjusted income and consumption are "chained", and headline GDP is inflation adjusted. This means the impact to GDP is best understood by looking at the chained numbers. Econintersect believes year-over-year trends are very revealing in understanding economic dynamics.Per capita inflation adjusted expenditure has exceeded the pre-recession peak.

Personal Income increased slightly in November, Spending increased 0.2% --The BEA released the Personal Income and Outlays report for November: Personal income increased $1.6 billion (less than 0.1 percent) in November according to estimates released today by the Bureau of Economic Analysis. ... personal consumption expenditures (PCE) increased $24.0 billion (0.2 percent)....Real PCE increased 0.1 percent. The PCE price index increased less than 0.1 percent. Excluding food and energy, the PCE price index increased less than 0.1 percent. The November PCE price index increased 1.4 percent year-over-year and the November PCE price index, excluding food and energy, increased 1.6 percent year-over-year. The November PCE price index increased 1.4 percent year-over-year and the November PCE price index, excluding food and energy, increased 1.6 percent year-over-year. The following graph shows real Personal Consumption Expenditures (PCE) through November 2016 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change. The dashed red lines are the quarterly levels for real PCE. The increase in personal income and the increase in PCE were below expectations. Using the two-month method to estimate Q4 PCE growth, PCE was increasing at a 2.7% annual rate in Q4 2016. (using the mid-month method, PCE was increasing 3.2%). This suggests decent PCE growth in Q4.

Real Disposable Income Per Capita Declined in November - With the release of today's report on November Personal Incomes and Outlays we can now take a closer look at "Real" Disposable Personal Income Per Capita. At two decimal places, the nominal -0.08% month-over-month change in disposable income was trimmed to -0.11% when we adjust for inflation. The year-over-year metrics are 2.90% nominal and 1.90% real. The trend since 2013 has been one of steady growth. The first chart shows both the nominal per capita disposable income and the real (inflation-adjusted) equivalent since 2000. This indicator was significantly disrupted by the bizarre but predictable oscillation caused by 2012 year-end tax strategies in expectation of tax hikes in 2013. The BEA uses the average dollar value in 2009 for inflation adjustment. But the 2009 peg is arbitrary and unintuitive. For a more natural comparison, let's compare the nominal and real growth in per-capita disposable income since 2000. Nominal disposable income is up 71.1% since then. But the real purchasing power of those dollars is up only 26.2%.

Why US liberals are now buying guns too - Gun sales in America hit record levels in October amid fears a Hillary Clinton election victory would lead to increased controls. Many expected the election of Donald Trump, whose candidacy was backed by the National Rifle Association, to bring an end to the panic buying. Shares in gun manufacturers dropped by as much as 18% following his victory. But instead FBI background checks for gun transactions soared to a new record for a single day - 185,713 - during the Black Friday sales on 25 November, according to gun control news site The Trace. Some of this has been put down to gun retailers selling off stock at reduced prices, but there have also been reports of more "non-traditional" buyers, such as African Americans and other minorities, turning up at gun shops and shooting ranges. Lara Smith, national spokesperson for the Liberal Gun Club, says her organisation has seen a "huge" rise in enquiries since November's election and a 10% increase in paid members. Some of the new members are reluctant first-time gun owners, says Smith, concerned that isolated acts of aggression against minorities could escalate into something more violent and that a Trump administration will dismantle key constitutional rights, leading to a "more fascist rule than the US has ever had". The club, which has nine chapters and members in all 50 states, aims to provide a forum for people whose political beliefs do not fit the traditional right-wing gun enthusiast stereotype.

FCC Republicans vow to gut net neutrality rules “as soon as possible” - The US Federal Communications Commission's two Republican members told ISPs yesterday that they will get to work on gutting net neutrality rules "as soon as possible." FCC Republicans Ajit Pai and Michael O'Rielly sent a letter to five lobby groups representing wireless carriers and small ISPs; while the letter is mostly about plans to extend an exemption for small providers from certain disclosure requirements, the commissioners also said they will tackle the entire net neutrality order shortly after President-elect Donald Trump's inauguration on January 20. "[W]e will seek to revisit [the disclosure] requirements, and the Title II Net Neutrality proceeding more broadly, as soon as possible," they wrote, referring to the order that imposed net neutrality rules and reclassified ISPs as common carriers under Title II of the Communications Act. Pai and O'Rielly noted that they "dissented from the Commission's February 2015 Net Neutrality decision, including the Order's imposition of unnecessary and unjustified burdens on providers." Pai and O'Rielly will have a 2-1 Republican majority on the FCC after the departure of Democratic Chairman Tom Wheeler on January 20. Pai previously said that the Title II net neutrality order's "days are numbered" under Trump, while O'Rielly said he intends to "undo harmful policies" such as the Title II reclassification. The net neutrality order gave ISPs with 100,000 or fewer subscribers a temporary exemption from enhanced transparency requirements that force operators to provide more information about the plans they offer and their network performance. ISPs can comply with the rules by adopting "nutrition labels" that give consumers details about prices (including hidden fees tacked onto the base price), data caps, overage charges, speed, latency, packet loss, and so on. The exemption for small providers lapsed on December 15 after the FCC couldn't agree on a deal to extend it. Pai and O'Rielly tried to convince fellow commissioners to extend the exemption for small providers and apply it to any ISP with up to 250,000 subscribers. To make things more complicated, the enhanced transparency rules haven't yet taken effect for ISPs of any size because that portion of the net neutrality order required an additional review by the Office of Management and Budget (OMB) to comply with the Paperwork Reduction Act. The OMB finally approved the new requirements last week, and they are now set to take effect on January 17.

Durable Goods New Orders Declined in November 2016: The headlines say the durable goods new orders declined. The unadjusted three month rolling average also declined. . Transport is the usual main driver this month - and it significantly declined. This series has wide swings monthly so our primary metric is the three month rolling average which declined but remains in expansion. The real issue here is that inflation is starting to grab in this sector making real growth much less than appears at face value. The trends on this series are not indicating any real economic improvement.Econintersect Analysis:

The Federal Reserve's Durable Goods Industrial Production Index (seasonally adjusted) growth down 0.3 % month-over-month, up 0.9 % year-over-year [note that this is a series with moderate backward revision - and it uses production as a pulse point (not new orders or shipments)] - three month trend is decelerating, but the trend over the last year is relatively flat.

November Durable Goods Orders Take a Dive -- The Advance Report on Manufacturers’ Shipments, Inventories and Orders released today gives us a first look at the latest durable goods numbers. Here is the Bureau's summary on new orders: New orders for manufactured durable goods in November decreased $11.0 billion or 4.6 percent to $228.2 billion, the U.S. Census Bureau announced today. This decrease, down following four consecutive monthly increases, followed a 4.8 percent October increase. Excluding transportation, new orders increased 0.5 percent. Excluding defense, new orders decreased 6.6 percent. Transportation equipment, also down following four consecutive monthly increases, drove the decrease, $11.7 billion or 13.2 percent to $76.6 billion. Download full PDFThe latest new orders number at -4.6% month-over-month (MoM) was close to the Investing.com consensus of -4.7%. The series is down 1.9% year-over-year (YoY).If we exclude transportation, "core" durable goods came in at 0.5% MoM, which beat the Investing.com consensus of 0.2%. The core measure is only up 1.8% YoY.If we exclude both transportation and defense for an even more fundamental "core", the latest number is down 2.4% MoM but only 1.8% YoY. Core Capital Goods New Orders (nondefense capital goods used in the production of goods or services, excluding aircraft) is an important gauge of business spending, often referred to as Core Capex. It rose 0.9% MoM but is down 3.2% YoY.For a look at the big picture and an understanding of the relative size of the major components, here is an area chart of Durable Goods New Orders minus Transportation and Defense with those two components stacked on top. We've also included a dotted line to show the relative size of Core Capex.

Durable Goods Prove A Drag On Inflation – St Louis Fed - For the past three decades, consumer prices in the U.S. have grown at an average pace of 2 percent per year. Despite several recessions, various stock market crashes and a severe financial crisis, prices have shown none of the volatility that characterized the 1970s and the early 1980s. The figure below shows the average consumer price level, as measured by the personal consumption expenditures price index, normalized at 100 for January 1990. Since January 2012, the Federal Open Market Committee (FOMC) has explicitly interpreted its price stability mandate as meaning 2 percent annual inflation, thus matching stated policy with previous performance. However, inflation has fallen well short of this target since then. The dotted line in the figure above shows the path the price level would have followed since January 2012 had it grown at 2 percent annually. As we can see, prices have been diverging away from target, growing at only 1.1 percent annually. Even after “liftoff" in December 2015, inflation seems to be underperforming. Digging under the surface reveals that not all prices move in tandem. In fact, there are significant differences in trend and volatility. The price of nondurable goods (e.g., food and gas), which account for roughly one quarter of consumer expenditures, has been growing at about 1.7 percent annually, a slightly slower pace than the average price level. Interestingly, there was a marked slowdown after the last recession. In fact, prices for nondurables have remained roughly constant since mid-2011. In contrast, the price of durable goods has been steadily declining since the mid-1990s, averaging a contraction of 1.3 percent annually over the sample period. This trend, largely driven by the ongoing decline in the price of consumer electronics, does not show any signs of reversing or slowing down. Note, however, that expenditures in durable goods represent only about 10 percent of consumer expenditures.

Lockheed Tanks After Trump Tweets He Told Boeing To Price Cheaper F-18 Competitor To F-35 -- Another day, another market-moving tweet from Donald Trump. Moments ago, the president-elect, following up on his recent spat with Lockheed over the F-35, which one week ago Trump said its "program and cost is out of control”, continued his crusade on over-budget government programs, when he tweeted that "based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price-out a comparable F-18 Super Hornet!" Based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price-out a comparable F-18 Super Hornet! — Donald J. Trump (@realDonaldTrump) December 22, 2016 The immediate kneejerk response has been to send Boeing stock higher, while LMT has slid over 1% in the after hours, as Trump once again moves stocks with his tweets.

Lockheed Martin CEO Marillyn Hewson promises Trump she'll cut F-35 costs - Dec. 23, 2016: Lockheed Martin's CEO gave President-elect Donald Trump her "personal commitment" to cut the cost of the stealthy F-35 fighter jet. Marillyn Hewson said she had a "very good conversation" with Trump Friday, the day after he tweeted that he was considering replacing the costly F-35 Joint Strike Fighter with a modified version of a cheaper jet. "I've heard his message loud and clear about reducing the cost of the F-35," Hewson said in a statement. "I gave him my personal commitment to drive the cost down aggressively." She added, "We're ready to deliver."Earlier in the week, Trump extracted a promise from Boeing's Dennis Muilenburg to lower the cost of building new Air Force One jets after Trump said estimated costs were "out of control." Trump has pitted aerospace giants Lockheed Martin and Boeing against each other by suggesting Thursday the F-35 could be replaced with Boeing's F-18 Super Hornet. "Based on the tremendous cost and cost overruns of the Lockheed Martin F-35 I have asked Boeing to price-out a comparable F-18 Super Hornet!" Trump tweeted. His message followed a Wednesday meeting with Hewson and Muilenburg to discuss their respective government deals.

Car-tastrophe - GM, Fiat Chrysler Idle 7 Plants; Over 10,000 Workers Affected --Just weeks after Ford idled four plants "due to slowing sales", GM and Fiat Chrysler announced today that they will idle seven plants across Canada and US as they work to reduce near-record high inventories amid weakening sales.With an inventories-to-sales ratio above historical peaks (only beaten by huge spike in 2008 when sales stopped), the pain for automakers has only just begun...For example, GM's inventory of vehicles on dealer lots at the end of November stood at 874,162, up 26.5% from the same time a year ago. And so, as AP reports,General Motors will temporarily close five factories next month as it tries to reduce a growing inventory of cars on dealer lots.The factories will close anywhere from one to three weeks due to the ongoing U.S. market shift toward trucks and SUVs, spokeswoman Dayna Hart said Monday. Just over 10,000 workers will be idled.The company's Detroit-Hamtramck factory and Fairfax Assembly plant in Kansas City, Kansas, each will be shut down for three weeks, while a plant in Lansing, Michigan, will be down for two weeks. Factories in Lordstown, Ohio, and Bowling Green, Kentucky, each will be idled for one week.The factories make most cars in the General Motors lineup including the Chevrolet Cruze, Camaro, Corvette, Malibu, Volt and Impala; the Cadillac CT6, CTS and ATS; and the Buick Lacrosse.At the current sales pace, GM dealers have enough Malibus to last for 84 days and enough Camaros to last for 177 days, according to Ward's Automotive.Normally automakers like to have a 60-day supply on lots. And these shutdowns follow Ford Motor Co., which said in October that it was cutting production at plants that make the Escape small SUV and F-150 pickup in the face of slowing sales.

Total Vehicle Sales and Recent Plant Closings a Warning Sign (Video) - We pay attention when people shut down manufacturing plants, and GM and Ford are doing this very act, we discuss the implications for the industry and overall economy in this video. We told investors that a lot of dogshit stocks are being moved up in this rally. Maybe we have sold too many vehicles since the financial crisis and the auto industry is in for some deep pain in 2017 with a glut in vehicle inventories right now? Time will tell, but definitely something to pay attention towards as nobody sees recessions, not the Federal Reserve, not Economists, and definitely not the Stock Market, they are always the last to know of an impending recession until it smacks them in the face for months, i.e., the sub prime housing bubble. Right now nobody thinks their shit stinks in financial markets, I have news for you, there are a lot of stinking stocks out in the market right now that are going to lose a lot of value over the next 5 years! 99 percent of people who are so called experts that go on television have no idea what they are talking about, and over 70 percent of market professionals who manage money for a living, you know "professionals" are completely incompetent and have no clue where market assets should be priced.The standards for this profession are so low compared to the fields of physics, engineering, and mathematical professions. Basically, a bunch of used car salesman types in comparison to those minds.

Is The Auto Industry Slowdown Signaling Trouble Ahead For The Overall Economy -- While it's not as applicable today, there used to be a saying that "as goes GM, so goes the economy." While the "Big 3" aren't quite as big as they used to be, they still offer vital clues about the overall economic health of the United States. Unfortunately for anyone who has been paying attention, those "vital clues" are all flashing red warning signs as each passing day seems to bring more news of idled plants and/or shift reductions (see here and here). Of course, rising interest rates, tightening credit, softening used car prices and rising subprime auto delinquencies just as the North American auto SAAR seems to be peaking out well above normalized replacement volumes are probably not great signs either. Perhaps that's why Goldman's David Tamberrino recently downgraded the U.S. auto industry on the thesis that sales would trend back toward normalized demand of 15mm units per year over the next two years. Of course, as we've pointed out numerous times in the past we tend to agree with his assessment of normalized demand based on a driving age population of 255mm and a 17.5 year vehicle useful life which implies normalized demand for annual sales of ~14.6mm units. We lower our Autos and Auto Parts coverage view to Cautious from Neutral. As we progress through the later stages of the US auto cycle, we expect a sales plateau through 2017 held up by increasing OEM incentives. Beyond this, we see US light vehicle sales mean reverting back toward normalized SAAR of 15mn from 2018 through 2020 as pent-up demand clears through. In addition, as we dissect some of the drivers of the later stage growth, we expect the non-recurrence of several tailwinds (higher leasing penetration, higher non- and sub- prime FICO score penetration) in addition to macroeconomic factors (rising interest rates and crude oil prices) to be headwinds to further growth and the favorable pricing environment for both OEMs and suppliers.

In a Retreat, Uber Ends Its Self-Driving Car Experiment in San Francisco - NYTimes: Uber’s grand experiment of a self-driving car service in its hometown officially lasted only a week. On Wednesday, Uber ended the autonomous car service in San Francisco after defying California officials who had told the company to stop the service because it was illegal. The company lacked the necessary state permits for autonomous driving, state officials have said. In a statement on Wednesday, the company said it ended the pilot program after the California Department of Motor Vehicles revoked the registrations for its self-driving cars. “We’re now looking at where we can redeploy these cars but remain 100 percent committed to California and will be redoubling our efforts to develop workable statewide rules,” the company said. Breaking: @CA_DMV revokes registration of 16 self-driving Uber vehicles in San Francisco permit flap pic.twitter.com/SiRpaqZXHq Uber has tended to barrel into new markets by flouting local laws, part of a combative approach to expand globally. Uber began a pilot of its self-driving experiment in Pittsburgh in September, which is continuing. Yet the defeat in California on self-driving vehicles is one of a growing number of setbacks. The company gave up on its own ride-hailing service in China this year, choosing instead to invest in a local incumbent, Didi Chuxing. It has also turned tail or reduced its presence in other markets, including some cities in Germany. A day before Uber began its pilot, state regulators were explicit about their demands that the company adhere to the rules. In a statement on Dec. 13 about the testing of autonomous vehicles, the Department of Motor Vehicles said: “We have a permitting process in place to ensure public safety as this technology is being tested. Twenty manufacturers have already obtained permits to test hundreds of cars on California roads. Uber shall do the same.” Nonetheless, as recently as Friday, Uber remained defiant. It said that it had no intention of ending its test and that its self-driving cars were still on the road and picking up passengers.

U.S. Factories Are Working Again; Factory Workers, Not So Much - Factories were humming back to life even before a pledge to revitalize American manufacturing helped propel Donald Trump to the presidency. But jobs aren’t returning in kind, a reality that will make it tough for Mr. Trump—or anyone—to significantly boost employment in the industrial heartland, as he has pledged to do. Technology and automation have given manufacturing companies the means to function, and even thrive, with fewer employees than ever before. Manufacturing output is nearing prerecession levels. But about 1.5 million factory jobs—about 20% of positions lost during the downturn—haven’t returned. Manufacturers employed 12.3 million people in November, down from 13.7 million in December 2007, when the recession officially began. Factory output was flat in November while manufacturing employment fell from the previous month, according to Federal Reserve and Labor Department data. Indeed, factory output has largely bounced back since the recession but manufacturing employment has lagged behind. Overall the number of positions on U.S. payrolls grew 11% between June 2009, when the recession officially ended, and November, when the Labor Department counted about 145 million jobs on nonfarm payrolls. Manufacturing payrolls grew only 5% during that span. Well-trained workers are in demand. The number of open manufacturing positions is at a 15-year high. But a swath of low-skilled former factory workers seems frozen out of the increasingly high tech sector no matter how fast the economy grows.

Manufacturing Matters Even If It Doesn't Create Many Jobs - Justin Fox - Manufacturing employment in the U.S. has been on the decline since the late 1970s. Trade with China and other countries has played a role in that, but probably not the biggest role.For example, economists David Autor, David Dorn and Gordon H. Hanson have estimated that 985,000 U.S. manufacturing jobs disappeared from 1999 through 2011 because of competition from China. But as economist Paul Krugman put it: That’s less than a fifth of the absolute loss of manufacturing jobs over that period, and a quite small share of the long-term manufacturing decline.Yeah, that’s still a lot of people losing their jobs, and it would be (and has been) politically boneheaded to ignore them. But it’s an indication that, even if some manufacturing activity shifted back to the U.S., automation and other forces mean that it won’t generate huge numbers of factory jobs.So does that suggest we should chill out about manufacturing’s apparent decline in the U.S. and accept that the future of the economy is services? Actually, no, not at all. “Just in terms of numbers you’re not going to see this surge in manufacturing employment,” says Gary Pisano, a professor at Harvard Business School. “But that’s not a reason to dismiss the role of manufacturing.”I caught up with Pisano today by phone after seeing his name attached to the latest installment of Autor, Dorn and Hanson’s influential research on the economic impact of U.S. trade with China. That paper (also co-authored with Pisano’s HBS colleague Pian Shu) examined the link between corporate patents, research-and-development spending and exposure to competition from Chinese imports.The authors found that “publicly listed firms in industries that have seen larger increases in import penetration from China have suffered larger reductions in patenting,” and concluded: The decline of innovation in the face of Chinese import competition suggests that R&D and manufacturing tend to be complements, rather than substitutes. That is, when faced with intensifying rivalry in the manufacturing stage of industry production, firms tend not to substitute effort in manufacturing with effort in R&D.

Rail Week Ending 17 December 2016: Another Relatively Bad Week - Week 50 of 2016 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. Ignoring coal and grain which actually made a positive contribution - this was a very bad week. A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 523,949 carloads and intermodal units, down 0.3 percent compared with the same week last year. Total carloads for the week ending December 17 were 254,700 carloads, down 2.8 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 269,249 containers and trailers, up 2.2 percent compared to 2015. Three of the 10 carload commodity groups posted an increase compared with the same week in 2015. They were grain, up 5.3 percent to 24,193 carloads; coal, up 2.5 percent to 87,219 carloads; and metallic ores and metals, up 1.5 percent to 20,955 carloads. Commodity groups that posted decreases compared with the same week in 2015 included petroleum and petroleum products, down 15.6 percent to 11,089 carloads; nonmetallic minerals, down 12.5 percent to 27,842 carloads; and motor vehicles and parts, down 10.8 percent to 17,640 carloads. For the first 50 weeks of 2016, U.S. railroads reported cumulative volume of 12,636,976 carloads, down 8.8 percent from the same point last year; and 13,027,744 intermodal units, down 2.3 percent from last year. Total combined U.S. traffic for the first 50 weeks of 2016 was 25,664,720 carloads and intermodal units, a decrease of 5.6 percent compared to last year.

Chemical Activity Barometer "Ends Year on Strong Note" - From the American Chemistry Council: Chemical Activity Barometer Ends Year on Strong Note; Suggests Expanded Business Growth in Early 2017 The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), ended the year on a strong note, posting a monthly gain of 0.3 percent and a year-over-year gain of 4.4 percent, a significant improvement over the first half of the year, and a pace not seen since September 2010. All data is measured on a three-month moving average (3MMA). On an unadjusted basis the CAB climbed 0.6 percent in December, and 4.8 percent for the year...In December all of the four core categories for the CAB improved. Production-related indicators were positive, despite last week’s announcement that housing starts tumbled. “Housing starts were at a nine-year high,” noted ACC Chief Economist Kevin Swift. “The foundation remains strong. Overall trends in construction-related resins, pigments, and related performance chemistry were positive and suggest further gains in housing next year,” he added. Other indicators, including equity prices, product prices, and inventory were also positive... Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.

December 2016 Chemical Activity Barometer Ends Year Strongly: The Chemical Activity Barometer (CAB) ended the year on a strong note, posting a monthly gain of 0.3 percent and a year-over-year gain of 4.4 percent, a significant improvement over the first half of the year, and a pace not seen since September 2010. All data is measured on a three-month moving average (3MMA). On an unadjusted basis the CAB climbed 0.6 percent in December, and 4.8 percent for the year. Noted ACC Chief Economist Kevin Swift: Housing starts were at a nine-year high. The foundation remains strong. Overall trends in construction-related resins, pigments, and related performance chemistry were positive and suggest further gains in housing next year. Other indicators, including equity prices, product prices, and inventory were also positive. The Chemical Activity Barometer has four primary components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators. In December all of the four core categories for the CAB improved. Production-related indicators were positive, despite last week's announcement that housing starts tumbled.

Kansas City Fed: Regional Manufacturing Activity "Improved Considerably" in December - From the Kansas City Fed: Tenth District Manufacturing Activity Improved Considerably: The Federal Reserve Bank of Kansas City released the December Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity improved considerably to its highest growth rate in over two years. “This was the highest composite reading in our survey since May 2014,” said Wilkerson. “This is now four straight months of factory expansion in our region, following a difficult time for many plants in 2015 and much of 2016.” The month-over-month composite index was 11 in December, up from 1 in November and 6 in October. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Activity in nondurable goods plants increased markedly, particularly for food and plastics, while durable goods plants expanded at a slower pace. Most month-over-month indexes improved in December. The production index jumped from 9 to 24, and the shipments, new orders, and order backlog indexes also rose. The employment index increased from 1 to 10, its highest level since May 2014. ... The Kansas City region was hit hard by the decline in oil prices, but activity is expanding again.

Kansas City Fed Survey: December Activity Highest Rate in Over Two Years -The Kansas City Fed Manufacturing Survey business conditions indicator measures activity in the following states: Colorado, Kansas, Nebraska, Oklahoma, Wyoming, western Missouri, and northern New Mexico. Quarterly data for this indicator dates back to 1995, but monthly data is only available from 2001. Here is an excerpt from the latest report: –The Federal Reserve Bank of Kansas City released the December Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity improved considerably to its highest growth rate in over two years.“This was the highest composite reading in our survey since May 2014,” said Wilkerson. “This is now four straight months of factory expansion in our region, following a difficult time for many plants in 2015 and much of 2016.” [Full PDF release here] Here is a snapshot of the complete Kansas City Fed Manufacturing Survey.

LA area Port Traffic increases Year-over-year in November - Special note: Now that the expansion to the Panama Canal has been completed, some of the traffic that used the ports of Los Angeles and Long Beach will eventually go through the canal. This could impact TEUs on the West Coast in the future. Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic. The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container). To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average. On a rolling 12 month basis, inbound traffic was up 0.5% compared to the rolling 12 months ending in October. Outbound traffic was up 1.1% compared to 12 months ending in October. The downturn in exports last year was probably due to the slowdown in China and the stronger dollar. Now exports are picking up a little. The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Markit Services PMI Eases in December -- The final November US Services Purchasing Managers' Index conducted by Markit came in at 54.6 percent, down 0.2 percent from the final October estimate. The Investing.com consensus was for 54.9 percent. Markit's Services PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Here is the opening from the latest press release:U.S. service providers indicated a solid upturn in business activity at the end of 2016, although the rate of expansion eased further from October’s recent peak amid a slightly softer rise in new work. The latest survey nonetheless revealed an acceleration in jobs growth for the third month running and a stronger degree of optimism about the year-ahead business outlook. Meanwhile, cost pressures intensified in December, with the latest rise in input prices one of the fastest seen since mid-2015.Adjusted for seasonal influences, the Markit Flash U.S. Services PMI™ Business Activity Index, posted 53.4 in December, down slightly from 54.6 in November but above the 50.0 no-change value for the tenth consecutive month. The average reading for the final quarter of 2016 (54.2) pointed to the steepest upturn in service sector output since Q4 2015. [Press Release] Here is a snapshot of the series since mid-2012.

Service PMI Drops To Three Month Low, But Job Creation Jumps As Input Costs Soar - Following a series of exuberant sentiment surveys since the Trump election, moments ago we got what may have been the first disappointing read in the past 2 months, when Markit reported that the December Service PMI dropped from 54.6 to a three month low of 53.4, missing expectations of a bounce to 55.2. Adjusted for seasonal influences, the Markit Flash U.S. Services PMI Business Activity Index posted 53.4 in December, down slightly from 54.6 in November but above the 50.0 no-change value for the tenth consecutive month. The average reading for the final quarter of 2016 (54.2) pointed to the steepest upturn in service sector output since Q4 2015. The rate of new business growth eased from November’s recent peak, but remained one of the fastest seen over the past 12 months. Survey respondents commented on improving domestic economic conditions and a general upturn in willingness to spend among clients.

Weekly Unemployment Claims: Up 21K, Disappoints Forecasts -- Here is the opening statement from the Department of Labor: In the week ending December 17, the advance figure for seasonally adjusted initial claims was 275,000, an increase of 21,000 from the previous week's unrevised level of 254,000. The 4-week moving average was 263,750, an increase of 6,000 from the previous week's unrevised average of 257,750.There were no special factors impacting this week's initial claims. This marks 94 consecutive weeks of initial claims below 300,000, the longest streak since 1970. [See full report] Today's seasonally adjusted 275K new claims, up 21K from last week's number, was much worse than the Investing.com forecast of 256K. Here is a close look at the data over the past few years (with a callout for the past year), which gives a clearer sense of the overall trend in relation to the last recession and the volatility in recent months.

Happy Holidays, You’re Fired: List of Companies Laying Off Workers at the End of the Year - The holidays are a particularly cruel time to lay off people, or to tell them they will be laid off soon. That has not stopped a number of companies from doing so. The most recent large public corporations to disclose job cuts are Boeing and General Motors, but they are not alone. Caterpillar announced layoffs and even said it was a bad time of the year to let workers go. According to the Herald Democrat on December 15: “There is never a good time for announcements like this, but we recognize this is particularly difficult for employees and their families during the holidays,” Caterpillar Spokesperson Lisa Miller said Thursday. Note that Caterpillar’s stock has been the second most successful in the Dow Jones Industrial Average this year, up 36%. Recently, a large Florida call center company laid off hundreds. According to the Sun Sentinel: Sitel Corp., a call center operation in Pompano Beach, has issued a notice to the state of Florida that it plans to lay off 804 workers in February. Sitel said the layoff would be between Feb. 14 and 28, according to the Worker Adjustment and Retraining Notification posted Friday. Sitel couldn’t be reached for comment. Stumbling Xerox Corp. will cut workers as it makes itself into two companies. According to MarketWatch: President Jeff Jacobson, who will become Xerox’s chief executive after the spin-off, said in an interview that the company needed changes to put it on a stronger footing. “Part of that unfortunately comes from headcount reductions,” Mr. Jacobson said. “You want to be a leaner organization.” Retailer Limited Stores, part of the giant L Brands, is on that train too. A story in the Columbus Dispatch included management comments: “As you know, product misses and massive shifts in retail shopping trends have been especially difficult for the company’s business, and the company is dealing with significant debt obligations,” And what was once one of the hottest new tech hardware companies, GoPro, ), has fallen on hard times. According to The New York Times on November 30: GoPro, the manufacturer of the wearable camera that has been a favorite of athletes, thrill-seekers and anyone else who wants to capture video of their antics, announced on Wednesday that it will eliminate hundreds of jobs to hold down costs.

November jobs numbers show states continue to recover --The November state jobs data, released Friday by the Bureau of Labor Statistics, shows most states on pace to continue their sluggish recoveries through the final months of the year. Mirroring national trends over the past quarter, a majority of states continue to add jobs and see declining unemployment rates. In most states where unemployment rates increased, the labor force grew— hopefully indicating a return to the labor market for previously discouraged job-seekers. From August to November, 32 states and the District of Columbia added jobs, with the largest percentage gains occurring in Montana (+1.4 percent), West Virginia (+1.4 percent), Washington (+1.1 percent), and Nebraska (+1.0 percent). Over the same period, 18 states lost jobs. Vermont (-1.0 percent), Alaska (-0.9 percent), Connecticut (-0.6 percent), Iowa (-0.5 percent), North Dakota (-0.5 percent), and Oklahoma (-0.5 percent) experienced the largest losses. As of November, seven states (Wyoming, New Mexico, Alabama, Mississippi, Connecticut, Maine, and New Jersey), are still below their pre-recession employment levels.The unemployment rate declined in 29 states from August to November. The largest declines occurred in Nevada (-1.1 percentage points), Massachusetts (-1.0 percentage points), Connecticut (-0.9 percentage points), Arizona (-0.8 percentage points), and South Carolina (-0.7 percentage points). At the same time, there were increases of no more than 0.5 percentage points in the unemployment rate in 14 states, and no significant change in the unemployment rate in eight states. Over the past year34 states have had declines in their unemployment rates and 15 have had an increase of no more than 1.0 percentage points, and two had no significant change. As of November, 23 states and the District of Columbia still have higher unemployment rates than at the beginning of the Great Recession.

Philly Fed: State Coincident Indexes increased in 43 states in November -- From the Philly Fed: The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for November 2016. In the past month, the indexes increased in 43 states, decreased in three, and remained stable in four, for a one-month diffusion index of 80. Over the past three months, the indexes increased in 43 states, decreased in five, and remained stable in two, for a three-month diffusion index of 76. Note: These are coincident indexes constructed from state employment data. This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged). In November 47 states had increasing activity (including minor increases). The recent downturn in the number of states increasing was mostly related to the decline in oil prices. Now that oil prices have recovered somewhat, most states are increasing again. Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and is mostly green now.

Xenophobe Trump Needs Foreigners to Hit 3% US Growth --To generate growth, the US needs more rather than less people from abroad. The math is simple. Amidst the barely concealed xenophobia of Trump's presidential campaign, something is becoming more evident the nearer he approaches the Oval Office: His economic promises go against what's been found possible in terms of generating growth relative to employment. To begin, witness another of his "clash of civilizations," "us against them" type remarks after the recent Berlin attacks: President-elect Donald Trump characterized the gruesome truck attack on a Christmas market in Berlin as part of a systematic campaign by Muslim extremists against Christians, fueling speculation that he views the war on terrorism as a clash of civilizations and not a conflict against extremists. “ISIS and other Islamist terrorists continually slaughter Christians in their communities and places of worship as part of their global jihad,” Trump said. “These terrorists and their regional and worldwide networks must be eradicated from the face of the earth, a mission we will carry out with all freedom-loving partners.” I thought this commentary from MarketWatch's Rex Nutting particularly useful with regard to accepting more migrants, wherever they may come from. With worker productivity slowing instead of speeding up being the trend of the past few decades, the US economy will need to hire more workers it doesn't currently have to achieve a sustained growth increase. There are only two ways to get the economy to move faster over a sustained period: Hire more workers, or make the workers we have more productive. Those two factors — working harder and working smarter — determine the economy’s potential growth rate, or its speed limit. Potential growth is the sustainable level of output that the economy can supply, and right now it’s below 2%. Here’s the economic equation: Potential growth = labor-force growth + productivity growth.

How Inefficient Health Care, Education and Housing May Be Damaging U.S. Productivity --Worrying about the steady decline in productivity growth has become routine in policy circles; specifying practical solutions hasn’t. A recent report from polling company Gallup, however, singles out anticompetitive and wasteful practices by teachers’ and doctors’ associations, universities and local governments. The collaboration with the U.S. Council on Competitiveness—which describes itself as a nonprofit, bipartisan group of labor, corporate and university leaders—tracks health, education and housing costs and outcomes from 1980 to 2014. It finds combined spending in these three areas has ballooned from 25% to 40% as a share of GDP since 1980, without commensurate improvements in quality.“These sectors have racked up tremendous expenses for consumers, businesses and taxpayers but provided relatively little value in return,” the report said. Health outcomes for the working-age U.S. population have stagnated alongside exploding health spending. Educational outcomes and home quality have dwindled or flatlined too, it found.“The problems with these sectors are self-inflicted. In many cases, small interest groups have won out at the expense of the public,” said report author Jonathan Rothwell, a former Brookings Institution economist now at Gallup.Most economists attribute the productivity slowdown variously to slowing rates of innovation, demographic aging, insufficient investment or excessive debt.Martin Baily, a Brookings productivity expert, stressed the difficulty of measuring health and education outputs and noted the productivity slowdown was happening outside these areas, too. “Health and education are important problem areas because their performance is not what it should be and we’re not measuring them correctly,” he said.The Gallup report focuses on areas where the U.S. has spent more to achieve the same, or worse, outcomes. That saps productivity growth—a key determinant of living standards—and diverts scarce resources from potentially more useful areas.While overall prices in the U.S. have increased by 2.5 times since 1980, education, health and housing costs have soared by factors of nine, five and four times, respectively. Mr. Rothwell attributes that to dysfunction that enriches suppliers and landowners at the expense of everyone else.Other economists have argued that the productivity growth potential of services such as health and education are naturally hampered given they are less amenable to mechanization. Rothwell goes further, pointing to flaws in supply that actually erode productivity.

Labor Productivity: New Normal or Real-Time Noise? - FRB Cleveland - Some economic observers have argued that the weakness of recent productivity data indicates we have entered a new era of low economic growth. To investigate that claim, we study labor productivity between 1968 and 2016 and compare recent productivity growth to its past behavior. We find that though recent productivity data are unambiguously weak, they are not greatly out of line with the variation of productivity over the historical record. We find that when labor productivity has been weak in the past, it did not persist at those levels. In addition, we find a systematic tendency to understate growth in real time, suggesting that the average rate of the past six years will likely be revised up in future.

The ‘alternative workforce’ is growing. Here’s why - Contract workers more than doubled, to 3.1 percent of the workforce, in the decade ending in 2015, while independent contractors rose 1.5 percent. The alternative workforce — temp, on-call, and contract workers, freelancers, and independent contractors — has been growing rapidly, but not primarily from Uber, Task Rabbit, and other firms in the so-called "gig" economy, according to research presented in The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015 (NBER Working Paper No. 22667). Independent contractors are the largest group in the nontraditional or "alt" workforce, and contract workers, employed by contract firms, are the fastest-growing segment. The alternative workforce, which represented 10.7 percent of the employee base in 2005, had grown to 15.8 percent by 2015, Lawrence F. Katz and Alan B. Krueger report. They find that contract workers' share of the total workforce more than doubled, from 1.4 percent to 3.1 percent. By comparison, workers in the widely discussed online "gig" economy accounted for just 0.5 percent of the workforce in 2015."The online gig workforce is relatively small compared to other forms of alternative work arrangements, although it is growing very rapidly," the researchers write. "About twice as many workers selling goods or services directly to customers reported finding customers through offline intermediaries than through online intermediaries." There have been several shifts in the composition of the alternative workforce since 2005. Women, college graduates, holders of multiple jobs, and Hispanics now represent a larger share of the alternative workforce than previously. Women now outnumber men among workers with alternative employment arrangements. Education, health care, information services, and manufacturing saw the greatest shift toward alternative work arrangements over the last decade, while construction and professional and business services, the industries with the highest share of workers in alternative work arrangements in 2005, saw little change. And, in a blow to the idea that young workers dominate the alternative employment space, nearly a quarter of Americans age 55 to 74 have alternative work, compared with only 6.4 percent among 16- to 24-year-olds.

Most of the Working Class Missed The Current Economic Expansion - Steve Hansen - If I hear one more idiot declare how well the economy is doing - I will scream. Half the population has not enjoyed economic improvement in the 21st century. The economy is measured by the medieval metric which is called Gross Domestic Product (GDP). GDP does not measure or correlate to the economic situation of the median household. In the 21st century, the inflation adjusted "economy" per capita has improved 13% per capita whilst the inflation adjusted income of the median household is literally unchanged. The median household has not seen an increase in income in the 21st century. Of all USA households, 37% do not own a house and did not enjoy the 60% appreciation of home prices in the 21st century - but this appreciation is only 17% after inflation adjustment, held down by the housing bubble collapse 2007-2012. The rate of home ownership has declined to 35-year lows. Only half of American adults own stocks - and this too is at 21st-century lows.It is not much of an exaggeration to say that many of the households below median likely have no real estate or equity assets (house or stocks) - and are spending their entire income (or maybe more). The most recent credible study (which is from 2012) I can find says "just over two-fifths of respondents (41%) report spending less than their income, 36% spend about equal to their income, and 19% spend more than their income.”

What should we expect of Americans who don’t work? - I wanted to highlight this bit from last week’s This Way Up summit on economic mobility, in which many AEI folks participated. Here is economist Michael Strain answering a question from moderator Greg Ip of the Wall Street Journal on the culture of non-work and what all those non-working, prime-age Americans owe society: (video) We do not feel comfortable talking about social norms, and we don’t feel comfortable talking about cultural norms, and we don’t feel comfortable talking about rights, and we don’t feel comfortable talking about duties. As a society, our comfort level with those topics has eroded dramatically over the last several decades. And along with the erosion of our comfort in discussing those issues, we have seen an erosion in those norms in themselves. It used to be the case that if you were an able-bodied, 35-year-old guy — say it’s the year 1960 or 1965 — and you weren’t working, you would feel social stigma, and you would feel like you weren’t leading the kind of life that you should in a normative sense, to a much stronger degree than a 35-year-old guy in the year 2016 feels that stigma and feels he’s not leading the life he should. And I think that is a problem. And I think people in Washington who have platforms and engage in public leadership — not the least of which are elected leaders — need to be more comfortable talking about that. And a recovery of a cultural norm, that if you can work, you should be working… and a recovery of a cultural norm that if you can work, you should be providing for your kids… and a recovery of a cultural norm that if you have an obligation to society, you should contribute, and add your skills and your talents and your efforts to your community, and to the broader fabric of the country in which you live, is necessary to solve these problems. I think policy can help create that cultural norm. And I think the strengthening of that cultural norm can help make policy more successful. And I think we underestimate the degree to which public leadership and public messaging can help.

‘White men’: the most dehumanizing insult of our times - The one good thing about Twitterstorms is that they tend, witlessly, to prove the point of the person they’re hounding. In the very act of whipping up fume and fury against someone who’s said something you’re not meant to say, these virtual pitchfork gangs confirm that person’s point, which was normally something like: ‘Have you ever noticed how risky it has become to express your thoughts on [some heated issue]?’ ‘You can’t say that!’, hollers the Twittermob in response. Well, yes, quite. So it was for Simon Jenkins this week. He wrote a column in the Guardian saying the one group of people you’re allowed to hate these days is old white men. ‘Stupid privileged white old man why doesn’t he STFU’, responded the Twittermob. Jenkins said that PSMs — pale, stale males, like him — have become targets for humiliation. All identities are celebrated now, except oldness, maleness and whiteness. Institutions are ‘hideously white’. Old voters are ‘selfish’. PSMs are blamed for Brexit and Trump, for decades of discrimination and much else besides, said Jenkins. Twitter melted, of course. The Huffington Post huffed. Radio phone-ins were held. But if Jenkins committed any wrong, it’s that he didn’t go far enough. He should have said that ‘white men’ has been the most dehumanising phrase of 2016, speaking to the terrifying and casual way in which the politics of identity erases those considered ‘problematic’. It’s now really easy to tell when someone is prejudiced: they use the term ‘white men’. 2016 has been the year of the ‘white men’ slur. It’s been gathering pace for a while. There’s been the fashion for articles that start with ‘Dear White People’, and proceed to tell white people how awful and stupid they are. Censorious students, most of them white, hilariously, rage against ‘white men’. If I had a penny for every time some jumped-up Joe Stalin on campus said to me ‘You would say that, you’re a white man’ — as if my pigmentation and penis control my brain — I reckon I’d have at least two quid. The Guardian, slowly morphing from a newspaper into a tumblr account, has been at the forefront of white men bashing. ‘Philosophy has to be about more than white men,’ said a columnist in 2015. ‘Why are so many white men trying to save the planet without the rest of us?’, asked another in 2014. Even when white men try to do good — not that I buy the idea the planet needs saving — they’re lambasted for their maleness and paleness. They can’t do right for being white.

Apple owes $2 million for not giving workers meal breaks - Apple has been ordered to cut a $2 million check for denying some of its retail workers meal breaks. The lawsuit was first filed in 2011 by four Apple employees in San Diego. They alleged that the company failed to give them meal and rest breaks, and didn't pay them in a timely manner, among other complaints. California law requires employers to give hourly workers a 30 minute meal break if they're working more than five hours a day. They're also require to provide 10 minute breaks for every four hours worked. In 2013, the case became a class action lawsuit that included California employees who had worked at Apple between 2007 and 2012, approximately 21,000 people. Apple made changes to its scheduling policy in 2012.Jeffrey Hogue, one of the attorneys who represented the class action, said the $2 million verdict came down last Friday -- but Apple could owe more money. The second half of the case is expected to conclude next week, Hogue told CNNMoney.

Combating Wage Theft under Donald Trump - In what has become something of an annualritual, the Department of Labor recently announced that an investigation of the garment industry in Southern California uncovered rampant wage theft. Eighty-five percent of inspected garment contractors had violated wage-and-hour laws, with the most offenses committed by contractors sewing garments for Ross Dress for Less, Forever 21, and TJ Maxx. Workers were found to be earning well below the minimum wage, as little as $3 an hour. Some were paid six cents per piece of clothing while they worked in sweatshop conditions. Adjusted for inflation, these wages are comparable to what the Triangle Shirtwaist Factory workers made in 1911. The Department will collect $1.3 million in back wages for these exploited workers. Such investigations can't root out all violations, of course. But under Labor Secretary Tom Perez and Wage and Hour Division Administrator David Weil, the federal agency has used strategic, targeted investigations like this one to great effect. The department has gone after subcontracters, franchises, and supply chain structures to send ripple effects throughout entire industries. Since 2009, it has recovered $1.6 billion in workers’ back wages. In 2015, it recovered an average of $700,000 every day, which the Wage and Hour Division explains is “enough for more than 3,600 working families to buy a week’s groceries.” Unfortunately, all that progress is likely to grind to a halt under a Trump administration. By choosing Andrew Puzder, CEO of fast-food giant CKE Restaurants, as his labor secretary, Trump has signaled to employers that the days of proactive law enforcement to protect our most vulnerable employees will soon come to an end.

US Government Quietly Starts Asking Travelers for Social Media Accounts - The U.S. government has quietly started to ask foreign travelers to hand over their social media accounts upon arriving in the country, a program that aims to spot potential terrorist threats but which civil liberties advocates have long opposed as a threat to privacy. The program has been active since Tuesday, asking travelers arriving to the U.S. on visa waivers to voluntarily enter information associated with their online presence, including "Facebook, Google+, Instagram, LinkedIn, and YouTube, as well as a space for users to input their account names on those sites," Politicoreports.The U.S. Department of Homeland Security first proposed the idea in June, when it was met with opposition and criticism from rights groups, consumer advocates, and other entities, including the Internet Association, which represents Facebook, Google, and Twitter.At the time, a coalition of groups including the American Civil Liberties Union (ACLU), the Center for American-Islamic Relations (CAIR), the Electronic Frontier Foundation (EFF), and the Center for Democracy and Technology (CDT), among others, sent a letter to the government warning that many travelers would feel obligated to give their information to border agents and that the program would "fall hardest on Arab and Muslim communities, whose usernames, posts, contacts, and social networks will be exposed to intense scrutiny."Social media accounts are "gateways into an enormous amount of [users'] online expression and associations, which can reflect highly sensitive information about that person's opinions, beliefs, identity, and community," the letter stated. But it appears the Obama administration ignored their warnings about the threat to privacy and free expression and finalized the program anyway.

Mexican Ambassador To U.S. Urges Illegals To Apply For Citizenship Before Trump Takes Office -- So what do you do if you're the Mexican Ambassador to the United States and are faced with a crisis whereby millions of your citizens have broken numerous federal laws of your host country by illegally immigrating without going through the proper channels? Well, you simply offer up creative new ways to "game the system" to avoid deportation, like submitting an application for citizenship. While you may have zero chance of actually being granted citizenship, at least you'll "no longer [be] subject to the deportation processes." And, as an added bonus, you won't "lose Mexican citizenship" either. Per The Hill, the ambassador has even expanded the hours of Mexican consulates in the United States to "better provide information and assistance" ahead of Trump taking office on January 20th. Ambassador Carlos Sada Solana told Mexican state news agency Notimex Tuesday that applying for citizenship could be an important defense against deportation and other actions if Trump changes U.S. immigration policies."It's one of the very important protection actions to become citizens, because then they're no longer subject to deportation processes and on the other hand, they don't lose Mexican citizenship," he told Notimex.Sada said Mexican consulates will expand their service hours to better provide information and assistance to their citizens amid concerns about how citizenship policies may change after Jan. 20.“The best we can do is inform ourselves and be conscious about our situation, and to know that in the consulates we have personnel that is dedicated specifically to the subject of protection," he said.

US Population Grows At Slowest Pace Since The Great Depression; Residents Flee Illinois Again - According to data released by the US Census, in 2016 the U.S. population grew at the lowest rate since the Great Depression, while the state of New York shrank for the first time in a decade. The biggest loser, again, was Illinois which shrank for a third consecutive year, losing 38,000 people, mostly from the Chicago area. The overall slowdown was due to uptick in deaths, a slowdown in births and a fractional drop in immigration, all of which damped American population growth for the year ended July 1. The 0.7% increase, to 323.1 million, was the smallest on record since 1936-37, according to William Frey, a demographer at the Brookings Institution.New York State, whose loss of 1,900 people put its population at 19.7 million, is shrinking because residents are leaving for other states. It has an aging population that is retiring in warmer places such as Florida, or staying put and dying, as the WSJ put it. “As a state that has more people leaving than going [in], that is not a good thing,” said Jan Vink, a researcher at Cornell University’s program on applied demographics. “People claim it’s about the taxes, it’s about the weather. There are many reasons.”

Illinois Is Losing 1 Resident Every 4.6 Minutes--Illinois has record loss of 114,000 residents to other states in 2016 as population shrinks by 37,500. Imagine the entire population of Peoria, Illinois’ seventh-largest city, all picking up and moving across state lines in one year, never to work, pay taxes or create jobs in Illinois again. That’s equivalent to what happened to Illinois over the past year: New migration data from the U.S. Census Bureau show that from July 2015 to July 2016, Illinois lost 114,000 people, on net, to other states, a record high for the Land of Lincoln. Now consider the permanent loss of the combined populations of Illinois’ 10 largest cities outside of Chicago: Aurora, Rockford, Joliet, Naperville, Springfield, Elgin, Waukegan, Champaign and Arlington Heights, along with Peoria. The loss of these 10 cities’ combined populations approximately equals Illinois’ net loss of population to other states since 2000.Illinois has lost some 1.22 million people, on net, over the past 16 years. For the third year in a row, Illinois is the only state in the region with a shrinking population. Illinois sustained record net losses for each of the last three years of census migration data: a net loss of 114,000 people from July 2015 – July 2016; a net loss of 105,000 people from July 2014-2015; and a net loss of 95,000 people in the year before that. From 1990-2011, the annual net loss of residents from Illinois to other states was 64,000 per year. But the 2011 income tax hikes, repeated property tax hikes and the state’s political dysfunction precipitated the record population losses of the last three years.

Ohio’s Republican Gov. Kasich blocks local control over minimum wage - It’s usually one of the core principles of conservatism: local control is ideal. The concept is based on the idea that the closer the government is to the public – literally and physically – the more responsive and effective it will be in reflecting Americans’ interests. Unless, that is, local citizens want to raise the minimum wage. At that point, it’s important for Republicans at the state level to put aside their principles and block progressive governance. Take the latest Cleveland Plain Dealer report, for example. Ohio Gov. John Kasich on Monday signed legislation blocking next year’s special election vote on whether to raise Cleveland’s minimum wage to $15 per hour, according to his office. Senate Bill 331 prohibits communities in the state from raising the minimum wage beyond the state’s minimum wage rate, currently set at $8.10 per hour. State lawmakers passed the bill earlier this month at the request of Cleveland city officials and others, who sought to forestall a special election on the wage hike next May. Just to clarify, the goal from proponents of a wage hike was to put the question to Cleveland voters: if local citizens wanted to increase the minimum wage, it’d be up to them to vote for such a policy next fall. Ohio’s Republican governor and Republican-led legislature acted to take the authority out of voters’ hands. Ohio’s current minimum wage is $8.10 per hour, a figure that will rise to $8.15 per hour next year. If a city decided it wanted a minimum of $8.20 per hour, the new state law would prevent such a change – regardless of the wishes of local voters or local officials. What’s more, it’s not just Ohio: the Huffington Post reported that 20 states have now passed laws “that preempt local governments from raising the minimum wage or requiring benefits for workers that go beyond what’s required by the state.” The last national increase to the minimum wage was in 2007. As a result of this year’s elections, Americans shouldn’t expect any federal action on this issue until 2021 at the earliest.

The GOP coup in North Carolina previews what we’re going to see everywhere -- There’s a kind of coup going on in North Carolina, one that tells us a lot about just how far Republicans are willing to go to hold on to power and undercut Democrats. Here’s what’s happening: After a close election, Democrat Roy Cooper defeated Republican incumbent Pat McCrory to win the governorship. So the Republican state legislature decided to call an “emergency” session before Cooper takes office and strip the governor of as many powers as it could. The bills Republicans are pushing through the legislature would, among other things, cut the number of appointments the governor can make by 80 percent; make his cabinet appointments subject to state senate confirmation; transfer authority for the state board of education from the governor to the superintendent (a Republican ousted a Democrat this year in the election for that seat); move the authority to appoint trustees of the University of North Carolina from the governor to the legislature; and dilute the governor’s control over the state board of elections and mandate that the board will be chaired by a Democrat in odd-numbered years (when there are no elections) and a Republican in even-numbered years (when there are elections). And they’re barely bothering to pretend that if a Republican governor is elected in four years they won’t just reverse most or all of these changes. This isn’t just hardball politics. This is a fundamentally anti-democratic approach to government, one that says that when we win, we get to implement our agenda, and when you win, you don’t.

Suspect in 'Vote Trump' vandalism and burning of black Mississippi church reportedly a member of the congregation - Business Insider: Mississippi authorities arrested a man Wednesday in the burning of an African-American church that was also spray-painted with the words, "Vote Trump." Andrew McClinton of Leland, Mississippi, was charged with first degree arson of a place of worship, said Warren Strain, spokesman for the Mississippi Department of Public Safety. McClinton is African-American. McClinton was arrested in Greenville, where Hopewell Missionary Baptist Church was burned and vandalized Nov. 1, a week before the presidential election. A Bishop at the church says man charged with burning black Mississippi church is a member of the church. It was not immediately clear whether McClinton is represented by an attorney. An investigation continues, but a state official said authorities don't believe politics was the reason for the fire. "We do not believe it was politically motivated. There may have been some efforts to make it appear politically motivated," Mississippi Insurance Commissioner Mike Chaney, who is also the state fire marshal, told The Associated Press.

Puerto Rico revised budget gap projection up $10 billion to $67.5 billion: Board | Reuters: Puerto Rico's federally appointed financial oversight board revealed on Tuesday a fresh budget deficit projection prepared by the outgoing government that is $10 billion more than forecast in October, the board said in a statement. The government of Puerto Rico will now face a budget deficit of $67.5 billion over the next 10 years if there are no changes made to its current laws, no new federal funding or any reduction in expenses, increases in revenue, structural reforms or restructuring of its long-term debt and pension obligations, the statement said. "According to the Revised Baseline Projections, the deficit the Government of Puerto Rico faces over the next 10 years is so large, that even if Puerto Rico's entire debt were to be wiped out (which is legally and equitably not an option), the Island's government would still be in the red," the board said referring to data provided by the outgoing governor Alejandro Garcia Padilla's administration. Created by the U.S. Congress this year under the Puerto Rico rescue law known as PROMESA, the board is working on debt restructuring talks with holders of Puerto Rico's $70 billion in bonds in an effort to pull the struggling island out of a crisis marked by a 45 percent poverty rate and shrinking population. The bipartisan, seven-member board must approve the island’s annual budgets. In November it set a target date of Jan. 31, 2017 to certify a fiscal turnaround plan that will now be presented by the U.S. commonwealth's incoming governor, Ricky Rossello.

Maine propane dealer to Trump voters: ‘I will no longer be delivering your gas’ - A Skowhegan propane dealer who said he’ll no longer deliver to supporters of President-elect Donald Trump called the Republican “the Antichrist,” but that he wouldn’t cut off freezing customers. If you call Turner LP Gas in Skowhegan, you get a message from owner Michael Turner: “If you voted for Donald Trump for president, I will no longer be delivering your gas,” it says. “Please find someone else.” Reached on Friday night, Turner said he recorded the message on Election Day. After media learned of it earlier that day, he said he had 50 voicemails. Most of them were from angry Trump supporters, but he said one of four were supportive. He said Trump is “despicable” and said, “I think he’s the Antichrist,” though the Skowhegan native and veteran said his family likely all voted for the president-elect because of his stances on gun rights and abortion.

Woman dies in Texas jail after police refuse her medical care for 2 weeks -- Needed attention is being drawn to the tragic and perhaps preventable death of Symone Nicole Marshall, 22, who died in police custody last week. Marshall was the mom of a 5 year-old daughter and moved to Texas to start a new life. According to her family, she had a good job and was planning to purchase a home. But that all changed on April 26, 2016 when she was forced off the road by an unknown driver in an act of road rage. The accident caused her car to flip several times and land in a ditch. When police responded to the accident, it was evident after the crash that Marshall needed medical attention. Instead of transporting her to a hospital, police cited her for not possessing a valid driver’s license and took her to the Walker County Jail in Huntsville, Texas. While in the jail, she pleaded with police to take her to a hospital because she was not feeling well. Her sister Honey Marshall told media outlet The New York Daily News, “When I talked to her from jail, she complained that her head was hurting and she kept blacking out… I called the jail several times and requested for them to take her to a real hospital and they wouldn’t do so. If they would have done this, her death could have been prevented and my sister would still be here.” Jail officials still ignored her situation and on May 10, 2016, Symone Marshall died in jail due to a blood clot in her lungs.

California’s highway department is destroying homeless people’s belongings on purpose, suit alleges - California’s massive transit bureau is routinely violating homeless people’s constitutional rights by seizing and destroying what little property they have, tossing everything from tents to family photos and crucial identification papers into trash crushers as state highway patrolmen stand by to prevent the hapless street dwellers from saving their belongings. That’s the charge leveled in a new lawsuit from an array of civil rights groups in the Oakland area. Caltrans, as the state agency is known, has declined to comment on the new allegations, which are substantiated in the complaint by the stories of a half-dozen homeless individuals whose improvised dwellings at the verge of state highways have been targeted by department sweeps in the past two years. James Leone, 56, landed on the street after losing his job as a mechanic during the Great Recession. “I’ve made money helping people with their cars and doing odd jobs,” Leone said in a statement. But then, in April, Caltrans workers showed up at the camp Leone and others had set up just west of the 980 freeway near downtown Oakland. Everything Leone had went into a crusher machine, including his tool kit. Workers destroyed his phonebook, too, leaving him unable to contact a sister he now hasn’t spoken to in two years. Even when the sweep notices do list a specific time and day, the plaintiffs say, homeless people can’t trust Caltrans to stick to its word. Patricia Moore lost a tent, cot, sleeping bag, coat, shoes, and all her clothes when work crews showed up at 8:00 one morning last March, instead of 9:00 as promised, and began throwing people’s property into a crusher. Such ruthless destruction of property does nothing to cure booming homelessness in the Bay Area and across the state. But it deprives the people allegedly victimized of their basic rights of due process, To make matters worse, Caltrans knows full well that what it’s doing is both harmful and wrong. It has twice in the past settled similar lawsuits by agreeing to cease the practice, and even erected an internal policy six years ago that instructs employees to handle sanitation sweeps of homeless encampments of department property with humanity — and with respect for homeless Americans’ constitutionally-guaranteed rights.

The NFL is helping the homeless? That's definitely fake news --About a week before Christmas, a story surfaced about a National Football League franchise opening the doors of its taxpayer-funded stadium to the homeless to bring them out of the cold. Naturally, it was fake news. That multiple news outlets accepted the story of the Minnesota Vikings opening up U.S. Bank Stadium to homeless Twin Cities residents is astonishing, if only because they felt a local government would never override the wishes of the NFL to divert resources to those less fortunate. Perhaps that was just their holiday spirit kicking in. Though they, like many other Americans, tend to think about homelessness only around the holidays and try to sweep it out of view for the rest of the year, the Vikings and U.S. Bank Stadium aren’t built around peace on Earth and goodwill to men. Despite the fact that taxpayers put $500 million toward the $1.1 billion stadium as part of one of the worst stadium-financing deals in recent history, the Minneapolis Star-Tribune points out that stadium manager SMG, concessionaire Aramark (with a market capitalization of $8.9 billion) and the Minnesota Sports Facilities Authority (MSFA) — whose members get free use of six-figure luxury suites for “marketing purposes” — would have to approve the use of the stadium as a warming station or overnight shelter. In Minneapolis, the folks at the Star-Tribune note that the Twin Cities has a substantial number of homeless shelters that not only address demand, but do so more effectively than any stopgap measure could. That’s fine, but according to the Amherst H. Wilder Foundation, there were more than 9,300 homeless people in Minnesota. Of those, 60% are dealing with significant mental illness, while 51% have a chronic health condition. Roughly 30% are homeless after losing a job or having their hours cut. In total, 35% of homeless women are on the street as a result of domestic abuse. Roughly 55% of all of Minnesota’s homeless are trying to get some assistance through subsidized housing, with 41% on a waiting list and another 14% unable to get on a wait list because it is closed.

Tennessee Man Gets $75 Check To "Restart His Life" After Being Wrongfully Imprisoned For 31 Years - In October 1977, a Memphis, Tennessee woman was raped in her home by two intruders. The woman subsequently identified one of the perpetrators as her neighbor, 22 year old Lawrence McKinney. One year later, McKinney was convicted on rape and burglary charges and sentenced to 115 years in prison. The only problem is that he didn't do it. After spending 31 years in prison, DNA evidence cleared Mckinney of any wrongdoing in 2008 and he was later released in 2009 with a very "generous" check of $75 from the Tennessee Department of Corrections to help "restart his life." To add insult to injury, McKinney told CNN that "because I had no ID it took me three months before I was able to cash it." Now, a 61-year-old McKinney is asking Tennessee Governor Bill Haslam to exonerate him, a move that would clear a path to pursue up to $1 million in compensation from the state Board of Claims for 3 decades of wrongful imprisonment. The Tennessee Board of Parole, which makes recommendations to the governor on such issues, denied McKinney's request for exoneration by a 7-0 vote at a hearing in September saying they could not "find clear and convincing evidence of innocence.”

Commuter-In-Chief: Obama Sets New Single-Day Clemency Record; More Than Previous 11 Presidents Combined - Earlier today President Obama commuted the sentences of another 153 federal prisoners bringing his total to 1,176, more than the previous 11 presidents combined. The president also pardoned another 78 individuals, bringing his total pardons over the course of his eight years in office to 148. Combined, these 231 acts of clemency sets a record for the most ever granted by a president in a single day in history. This latest move is just further evidence of his stated intention to ramp up commutations throughout the remainder of his presidency. And, while the President often claims publicly that his commutations are only for "low-level" and "non-violent" criminals, 395 of the 1,176 commutations were offered to people serving life sentences...which typically aren't given to "low-level" criminals caught with a couple ounces of drugs on them. Of course, in typical fashion, the President took to Twitter to brag about his latest "accomplishment." BREAKING: @POTUS has now commuted the sentences of 1,176 deserving people—more than the past 11 presidents combined. https://t.co/NoOfhZTaXJpic.twitter.com/VqRTtkKhzU

The Obama 'Recovery': Number Of Millennials Living At Home With Mom Reaches 75-Year High -- Millennials finally get to claim a trophy for an achievement they actually earned (no participation medals here)...that's right, Millennials have officially set a 75-year record for highest percentage of young adults living at home with mom. At just under 40%, Millennials are barely shy of the all-time record of 40.9% set in 1940, after the end of the Great Depression. For once, we have every confidence that our young snowflakes will excel in crushing this longstanding record. Per the Wall Street Journal: Almost 40% of young Americans were living with their parents, siblings or other relatives in 2015, the largest percentage since 1940, according to an analysis of census data by real estate tracker Trulia. Despite a rebounding economy and recent job growth, the share of those between the ages of 18 and 34 doubling up with parents or other family members has been rising since 2005. Back then, before the start of the last recession, roughly one out of three were living with family. The trend runs counter to that of previous economic cycles, when after a recession-related spike, the number of younger Americans living with relatives declined as the economy improved.

Mass incarceration and children’s outcomes: Criminal justice policy is education policy - Economic Policy Institute - As many as one in ten African American students has an incarcerated parent. One in four has a parent who is or has been incarcerated. The discriminatory incarceration of African American parents is an important cause of their children’s lowered performance, especially in schools where the trauma of parental incarceration is concentrated. In this report, we review studies from many disciplines showing that parental incarceration leads to an array of cognitive and noncognitive outcomes known to affect children’s performance in school, and we conclude that our criminal justice system makes an important contribution to the racial achievement gap. Educators have paid too little heed to this criminal justice crisis. Criminal justice reform should be a policy priority for educators who are committed to improving the achievement of African American children. While reform of federal policy may seem implausible in a Trump administration, educators can seize opportunities for such advocacy at state and local levels because many more parents are incarcerated in state than in federal prisons. In 2014, over 700,000 prisoners nationwide were serving sentences of a year or longer for nonviolent crimes. Over 600,000 of these were in state, not federal, prisons. Research in criminal justice, health, sociology, epidemiology, and economics demonstrates that when parents are incarcerated, children do worse across cognitive and noncognitive outcome measures. Download PDF

How does our discriminatory criminal justice system affect children?: Black children are six times as likely as white children to have a parent who’s been incarcerated --On any school day, one in ten African American children has a parent behind bars; African American children are six times as likely as white children to have had an imprisoned parent. Although young African American men are no more likely to use or sell drugs than young white men, young African American men are nearly three times as likely as white men to be arrested for drug use or sale; once arrested, they are more likely to be sentenced; and once sentenced, their jail or prison terms are typically 50 percent longer. The discriminatory incarceration of African American parents, fathers especially, lowers their children’s performance. We can reasonably infer that our criminal justice system contributes to the black-white achievement gap in both cognitive and non-cognitive skills.Children with parents who have been imprisoned are more likely to drop out. They tend to have worse GPAs. Their behavior deteriorates and they are more likely to be suspended or expelled. They are more likely to develop learning disabilities. Their mental health suffers—their anxiety tends to increase, as does their depression. They are more likely to face physical health problems like asthma, high cholesterol, and migraines. It may be tempting to think that these conditions simply reflect children’s socio-economic backgrounds; however, the statistical sophistication of studies we’ve reviewed all but eliminates the plausibility that these depressed outcomes substantially result from anything other than parental incarceration.Many more children are harmed by parental incarceration in state than in federal prisons. In 2014, over 700,000 prisoners nationwide were serving sentences of a year or longer for non-violent crimes. Over 600,000 of these were in state, not federal prisons. Educators can press for change in state and local policing and criminal justice policies that will benefit their students. For more, read our report, Mass incarceration and children’s outcomes: Criminal justice policy is education policy.

Teachers in Wealthy Districts Get Bulk of Indiana’s Performance Payouts - The Indiana Department of Education has announced how it will divvy up $40 million that state lawmakers set aside in 2015 to reward teachers who are rated effective and highly effective. Those bonuses will disproportionally go to teachers in wealthy districts, a fact that has many in the state up in arms. Carmel Clay Schools, where just 9 percent of their 16,000 students qualify for free or reduced-price lunch, will get the most— $2.4 million or roughly $2,422 per teacher. Another well-off Indianapolis suburban district, Zionsville Community Schools, where fewer than 5 percent of students qualify for the free and reduced-price lunch program, will receive about $2,240 per teacher. Meanwhile, Indianapolis, the state's largest district will receive just around $330,875, or $128.40 per educator. So teachers in those wealthy suburban districts will get bonuses nearly 20 times larger than effective and highly effective educators in Indianapolis. Indiana State Teachers Association President Teresa Meredith calls it a "flawed" system. "While educators at well-resourced schools performed well and received a much-deserved bonus, the educators teaching in some of the most challenging districts where socioeconomic factors can negatively impact student and school performance, were left out," she said in a statement. "We need high-quality educators to teach at our most-challenged schools, and this distribution of bonuses certainly won't compel them to do so." There seems to be political will to revisit the formula. Currently, districts are doled out the money based on student test scores and graduation rates. That money is then given to teachers who earned high ratings on their annual evaluation.

How free college transformed this Rust Belt town in Michigan - At a school board meeting in November 2005, then-Superintendent Janice Brown announced that a group of anonymous donors had agreed to pay for up to four years of college tuition for most students in the district who graduated that year – and for all future classes.The Kalamazoo Promise, one of the most generous scholarships of its kind, had begun in this city of 75,000, a former manufacturing hub fallen on Dickensian hard times. Today, 11 years later, it remains one of the most ambitious education and social experiments in the nation – a test of how far private money can go in reviving a city. It has tried to do so not by investing in some trendy new industrial park but in young people themselves, creating an educated generation for the knowledge economy. It’s a vision of a college-going culture that can be the balm for income inequality and recipe for Rust Belt renewal. The idea, says Ms. Brown, who is now a trustee of the scholarship, is to change the lives of young people first and the community second. “It’s a transformative movement,” she says. To a large extent, it’s working. The Promise has helped revive Kalamazoo’s public schools, sent hundreds of kids to college who normally wouldn’t have gone, and pumped new vitality into the city. But the experiment has also taken longer to reap benefits than many expected and exposed deeper social problems, spurring changes in the city’s approach. The lessons Kalamazoo has learned are important. Since the program began, at least 90 school districts and cities have started their own version of free-tuition programs using public and private money, though few are as generous or universal as Kalamazoo’s. Oregon, Tennessee, and Minnesota now offer promise programs for residents who want to go to community college. California is poised to start something similar. Kalamazoo’s model may become even more crucial in the future. As college tuition rates inexorably rise, and education becomes the hard drive of the economy of tomorrow, everyone is looking for ways to expand the number of people getting degrees. The question is whether Kalamazoo has found a formula that really is transformative – for it and for other cities around the country.

Many Americans Live in ‘Education Deserts,’ New Research Shows - In vast parts of the country, Americans in need of skills training often live many miles away from a community college. And for those who do live close to one, course options are often limited, covering a narrow range of fields. Many of those fields lack reliable data on expected earnings after graduation, preventing prospective students from making an informed choice of what and where to study. That’s the conclusion of new research from the Urban Institute, a left-leaning think tank in Washington. The report shows the lack of choices—geographically, at least—for students across higher education but raises the biggest concerns about Americans who generally can’t get into four-year schools. Namely: Recent high-school grads who never took the SAT or ACT and older workers who can’t move around because they have children or can’t leave their jobs. Researchers Kristin Blagg and Matthew Chingos use “education desert” to describe the predicament of a prospective student who lives at least 25 miles away from an associate’s degree program in her desired field. They use “choice desert” to describe the situation of a student who lives within 25 miles of one or more programs, but only one of them—or perhaps none—have earnings data. The ideal situation—”true informed choice”—is when students live within 25 miles of at least two programs in a given field with earnings data, allowing them to compare and choose the best option. They examined programs in a range of majors and calculated their average proximity to students who graduated from high school in 2011 or 2012. The biggest group is those who never took the SAT or ACT and thus couldn’t get into most four-year colleges. Across all majors examined in the study, an average of 35% of such students lived in an education desert. Sixty-one percent lived in a choice desert. Only 4% had “true informed choice,” living within 25 miles of at least two competing programs in a given field for which state earnings data was available.

Gov. Kasich signs law allowing guns on college campuses, at daycare centers - - Daycare centers, college campuses, and universities are all spots licensed gun owners may soon carry concealed weapons in Ohio. Gov. John Kasich signed a bill into law Monday that modifies the prohibition against carrying a concealed handgun onto institutions of higher education, daycare facilities, aircraft, certain government facilities, public areas of airport terminals, and school safety zones. For parents like Hannah Smerk, the law is a lot to take in. Her young son attends daycare in Broadview Heights. Smerk said she's a gun owner, but she's on the fence about the new law. "If someone starts anything in the school and someone has their CCW, they are there and they are trained properly on how to use a firearm and they protect children," she said. For many people like Diane Donnett, safety is key. She believes responsible, trained gun owners will make people think twice before committing violent acts. "The state of mind of somebody who wants to attack is going to be totally different," Donnett said. "Police departments can't be everywhere, so, unfortunately, we're reaching a point in society where civilians have to protect themselves when they're out and about." "Anyone who can take someone out who's a danger to someone else, I'm all for it," she said.

Hindus and Muslims Well Educated in US But Least Educated Worldwide -- Are immigrants in the United States or United Kingdom or any other host country truly representative samples of the populations in their places of origin? Are American Hindu or Muslim demographics comparable to those of the countries they left? A recent report done by Pew Research answers these questions with substantial amount of data on educational attainment. Hindus are the best educated religious group in the United States. They are followed by Jews in the second place and Muslims at number 3, according to Pew Research. However, both Hindus and Muslims are at the bottom in terms of educational attainment measured across the globe. 41% of Hindus and 36% of Muslims have had no formal schooling. Hindus have the widest gender gap in education among all religions in the world with Hindu women trailing Hindu men by 2.7 years. American Hindus are the most highly educated with 96% of them having college degrees, according to Pew Research. 75% of Jews and 54% of American Muslims have college degrees versus the US national average of 39% for all Americans. American Christians trail all other groups with just 36% of them having college degrees. 96% of Hindus and 80% of Muslims in the U.S. are either immigrants or the children of immigrants. Jews are the second-best educated in America with 59% of them having college degrees. Then come Buddhists (47%), Muslims (39%) and Christians (25%).

College Student Earns 4.0 GPA, Then Drops Out: "You Are Being Scammed!" -- Billy Williams just finished his first college semester and did so with the all-impressive 4.0 GPA. Instead of celebrating his accomplishments with friends and family, he decided to drop out of college entirely. Billy made a facebook post that is now going viral in which he explains his reasoning for dropping out: “Now that I’ve finished my first semester I think it’s safe to say…FUCK COLLEGE.Now before all you of you go batshit crazy… I have a few points to make.

1. Yes I have dropped out after finishing my first semester (with a 4.0 GPA). And it’s one of the best choices I’ve ever made. Not because I am averse to learning, but actually the exact opposite.

2. YOU ARE BEING SCAMMED. You may not see it today or tomorrow, but you will see it some day. Heck you may have already seen it if you’ve been through college.You are being put thousands into debt to learn things you will never even use. Wasting 4 years of your life to be stuck at a paycheck that grows slower than the rate of inflation. Paying $200 for a $6 textbook. Being taught by teacher’s who have never done what they’re teaching. Average income has increased 5x over the last 40 years while cost of college has increased 18x. You’re spending thousands of dollars to learn information you won’t ever even use just to get a piece of paper. I once even had an engineer tell me “I learned more in my first 30 days working than in my 5 years of college.” What does that tell you about this system? There are about a million more ways you’re being scammed into this.. just watch the video i’m gonna comment if you want to see more.

3. Colleges are REQUIRING people to spend money taking gen. ed. courses to learn about the quadratic formula (and other shit they will never use) when they could be giving classes on MARRIAGE and HOW TO DO YOUR TAXES.

The Minnesotans on the 'Professor Watchlist' are disappointingly unthreatening | City Pages: The modern college is a tinderbox of radical leftism, against which we must all be vigilant.0 This you may learn not by visiting one of said campuses (steer clear) or reading a newspaper (ditto), but in the way people now attain their education: by visiting an obscure website. The “Professor Watchlist,” launched in November with the goal of cataloguing names and photographs of teachers with a “radical agenda,” would not be out of place in 1970s Moscow or 1934 Berlin. Its American strain of suspicion about “leftist propaganda” can be traced to Wisconsin Sen. Joseph McCarthy. Wrong though he was about his red-baiting, McCarthy was at least living in a bifurcated world with a real, hostile enemy. These modern paranoids are fighting a lesser threat: the possibility that someone might get their feelings hurt or — even scarier — develop more feelings by age 21 than they had at 16. A review of the four Minnesotans on the list finds they are disappointingly unfrightening. The most famous was already being watched… by the people who give out literary trophies. In 2015, Macalester English professor Marlon James won the prestigious Man Booker Prize, Britain’s equivalent to the Pulitzer. To the watchlist boys, he’s a turncoat. They cite a talk James gave at a literary festival (suspicious!) in France (guilty!). He’s quoted saying America has a “third world” police force that practices “state-sponsored violence.” James was talking about police shootings of civilians “without consequences.” James doesn’t hate police. Both his parents were cops in his native Jamaica. He just thinks it’s fair to expect more.

The U.S. Government Is Collecting Student Loans It Promised to Forgive -The U.S. Department of Education has two quite different roles in the lives of indebted former students. The same bureaucracy that must safeguard taxpayer dollars by collecting $1.1 trillion in loans also oversees the nations largest-ever effort to forgive student debt. These dual roles have culminated in a strange situation. The Obama administration has repeatedly promised that borrowers eligible to have their student loans cancelled would be reimbursed for "every penny." But for months, the Education Department has been actively working to collect on federal student debt owed by tens of thousands of former students at Corinthian Colleges Inc., which filed for bankruptcy in 2015 under a cloud of fraud investigations. It is clear that government officials, working under their own guidelines, have reason to believe at least some of these same debts should be forgiven. When companies have similarly hounded borrowers to repay debt without disclosing that borrowers do not owe it, they have been charged by federal and state regulators with violating the law. “There’s no clear-cut reason why there shouldn’t be automatic loan forgiveness for people who otherwise would have a legal claim for deceptive conduct against this now-bankrupt company,” “These kids by and large have been scammed, and the Department of Education in some sense is continuing that harm by making them jump through hoops to get the relief to which they are entitled.” The Education Department is effectively disregarding records it obtained earlier this year—a development not previously reported—that identify former Corinthian students eligible for debt relief under the administration’s criteria. Instead of halting collections, however, the department has outsourced the work of informing these borrowers to budget-strapped state attorneys general. This account of the government’s inconsistent actions toward distressed borrowers is based on records and interviews with more than two dozen borrowers, former federal regulators, current state prosecutors, public interest attorneys, and others working on student loan issues. The government stands to gain from muscular collection tactics. Not all former Corinthian students are eligible to have their debt cancelled. But eliminating the debt of those who are could cost the federal government nearly $4 billion, according to Education Department estimates. That’s enough money to fund one year of Pell Grants for more than 600,000 students.

Baby Boomers Increasingly Having Social Security Checks Garnished To Cover Student Loan Payments - According to a new report from the Government Accountability Office, the federal government is increasingly garnishing Social Security benefits to help cover student loans payments owed by baby boomers. According the Wall Street Journal, a total of $1.1 billion has been garnished since 2001 with $171 million being collected in 2015 alone. The government has collected about $1.1 billion from Social Security recipients of all ages to go toward unpaid student loans since 2001,including $171 million last year, the Government Accountability Office said Tuesday. Most affected recipients in fiscal year 2015—114,000—were age 50 or older and receiving disability benefits, with the typical borrower losing about $140 a month. About 38,000 were above age 64.The report highlights the sharp growth in baby boomers entering retirement with student debt, most of it borrowed years ago to cover their own educations but some used to pay for their children’s schooling. Overall, about seven million Americans age 50 and older owed about $205 billion in federal student debt last year. About 1 in 3 were in default, raising the likelihood that garnishments will increase as more boomers retire. “I believe this is the tip of the iceberg of what may be to come if we don’t work harder on this problem,” said Sen. Claire McCaskill of Missouri, the top Democrat on the Senate Special Committee on Aging.The report showed garnishments left thousands with Social Security checks below the poverty line, prompting Sen. Elizabeth Warren (D., Mass.) to call the practice “predatory.” Both lawmakers said they will push legislation to ban it. But consumer advocates and some congressional Democrats say the government’s tactics have become too aggressive, targeting many borrowers who are destitute and have no hope of repaying. Most Social Security recipients rely on their checks as their primary source of income, other research shows.

The government is reducing Social Security checks to recover unpaid student debt - The federal government is increasingly taking money out of recipients’ Social Security checks to recover millions in unpaid student debt, leaving thousands of retired and disabled Americans with below-poverty incomes, according to a report set to be released Tuesday. The government has collected about $1.1 billion since 2001 from Social Security recipients of all ages over unpaid student loans, the Government Accountability Office reported. That includes $171 million in Social Security benefits in fiscal 2015 alone. In the year through September 2015, about 114,000 Americans age 50 and older had their Social Security benefits reduced to offset defaulted student loans. That figure—which includes 38,000 people age 65 or older—has risen 440% since 2002. The report highlights the growing number of baby boomers who are entering retirement with student debt, many of them in default on loans from decades ago. About 4 in 10 borrowers whose Social Security checks were garnished have held the debt for at least 20 years, the report said. Most of the borrowers took out the loans to pay for their own educations, though a big share borrowed to help pay for their children’s schooling.

Student Loan Crisis Increasingly Snares Seniors’ Social Security Benefits -- Jerri-Lynn Scofield - The number of older Americans defaulting on student loans has burgeoned over the last decade, with many embarking on degree courses or skills training or agreeing to co-sign loans for friends or other family members. No doubt the financial crisis accounts for some of this trend toward pursuing further education, with older workers often facing significant obstacles to securing employment if they’re unfortunate enough to lose a job. “[B]orrowers age 50 and older have considerably higher rates of default on their federal student loans,” compared to younger borrowers, the Government Accountability Office said in a report released yesterday. The federal government is increasingly garnishing the Social Security benefits of these older defaulting student debtors, leaving these unfortunate beneficiaries with benefit levels that fall below federal poverty guidelines. In 2015, the federal government seized some of the Social Security benefits of 114,000 people age 50 or older. Over half of these unfortunate people were receiving Social Security disability (as opposed to retirement benefits). From the GAO’s summary of the highlights of its report: In fiscal year 2015, Education collected about $4.5 billion on defaulted student loan debt, of which about $171 million—less than 10 percent—was collected through Social Security offsets. In addition to causing hardship, the problems of these defaulters continued (according to the GAO summary): More than one-third of older borrowers remained in default 5 years after becoming subject to offset, and some saw their loan balances increase over time despite offsets. However, nearly one-third of older borrowers were able to pay off their loans or cancel their debt by obtaining relief through a process known as a total and permanent disability (TPD) discharge, which is available to borrowers with a disability that is not expected to improve. Shockingly, however, even those who qualified for a TPD discharge could soon find themselves poleaxed by further snafus– including having this relief cancelled if they failed to comply with annual bureaucratic certification procedures.

CalPERS fiddles while taxpayers’ wallets burn – CalPERS, the nation’s largest pension fund with assets of $301 billion, invests money to pay the pensions of most California city and school employees. But it has really screwed up these investments the past couple of years, and we taxpayers will have to make up for that. For example, although CalPERS (California Public Employees Retirement System) projected a 7.5 percent rate of return, it made only .06 percent this past year and 2.4 percent the previous year. Off a wee bit, I’d say. So now most cities are going to have to increase their own annual fees to CalPERS to help cover that agency’s loss. In Palo Alto it will be $21 million this year, according to city Administrative Services Director Lalo Perez, who attended a CalPERS conference last week. Some of that money comes from our taxes, and Perez is seeking other ways to fund the fee. This is CalPERS’ fault. Its projected earnings fell through because it had a poor return on a lot of its investments and unrealistic earnings estimates. How can it say the return will be 7.5 percent and it comes in at .06? At the conference there weren’t many details, Perez said, though there was an acknowledgement its global investments were off. Our savings accounts yield more. This system used to be a win-win. Once cities contracted, CalPERS assumed their pension obligations, and lucrative transfers at first helped 1,251 local governments “confer highly compensated pensions to 10,000 local public employees,” according to a Nov. 26 article in Forbes magazine by Adam Andrzejewski. The cost: $2.8 billion annually.

California to Pay Billions More After Calpers Cuts Assumed Rate - California will be forced to pay billions more in pension contributions for government employees after the state retirement system’s decision to lower its assumed rate of return. California is already paying $5.38 billion to the California Public Employees’ Retirement System this year, and in fiscal year 2018 the state will need to add at least $200 million more. By fiscal year 2024 the annual tab will increase at least $2 billion from current levels. This all comes on top of increases already scheduled under the system, according to Governor Jerry Brown’s finance department. As fixed costs take up a greater portion of the state’s resources, new programs may become more difficult to bankroll. The state is already committed to a progressive minimum wage increase that will cost it $3.6 billion after it reaches $15 an hour in January 2022 and to pay more in matching funds for Medicaid. While it’s prudent, the lower investment return goal makes California "fiscally more vulnerable" if there’s an economic downturn, said Gabriel Petek, an analyst at S&P Global Ratings in San Francisco. "It’s putting more of an element of risk in the state’s fiscal structure." H.D. Palmer, a spokesman for the finance department, said that if left unchecked, unfunded obligations could crowd out spending in areas such as education and health-care. Brown on Wednesday hailed the lower investment return target as making the system "more sustainable."

California Drivers Pay Up for Underfunded Highway Patrol Pension -- Californians in April will start paying more to register their cars -- not to help maintain roads, but to keep the pension checks rolling for the motorcycle cops who policed them. The retirement fund for the California Highway Patrol is worse off than any other managed by California Public Employees’ Retirement System, the largest U.S. pension, as payments by the state and employees fail to keep up with benefits locked in during the dot-com bubble. As a result, the state’s contributions jumped 14 percent this year to $415 million and are projected to continue rising. A $10 increase to registration fees will help cover the expense. "It’s a pension tax -- call it what it is," said state Senator John Moorlach, a Republican who introduced a bill that would implement measures to cut pension costs. “It’s like a tumor that’s growing inside the budget."nThe situation facing the Highway Patrol underscores the consequences to taxpayers whose state and local governments have about $2 trillion less than they need to cover promised retirement benefits. On Wednesday, the Calpers board voted to lower the target investment return by half a percentage point to 7 percent over three years, which would require larger contributions from California and its municipalities to make up for the smaller projected gains.

Trump's pick for budget chief could signal major shift on Medicare, Social Security | TheHill: Donald Trump's selection of Rep. Mick Mulvaney (R-S.C) to become his budget chief could represent a major shift for the incoming administration on tackling entitlement spending. Conservatives are hailing the pick, while the left is bracing for significant budget cuts while possibly preparing for a battle over his nomination. Government spending and the debt wasn't a top issue in the 2016 presidential race, something Mulvaney bemoaned on the House floor earlier this year. On his congressional website, Mulvaney states, "It's disappointing that the discussion about our debt has faded away in the last few years." Unlike Mulvaney and many conservatives in Congress, Trump did not embrace massive changes to Medicare and Social Security and specifically rejected raising the retirement age for the popular programs. But Trump's decision to tap Mulvaney as his director of the Office of Management and Budget (OMB) has changed perceptions of how committed the incoming administration is to reducing the nation's debt. The South Carolina legislator was elected in the Republican wave of 2010, a class that came to power with the help of the Tea Party, a movement created as a direct response to President Obama's stimulus and healthcare reform laws. A review of the bills Mulvaney has introduced reveals a strong appetite to cutting government spending, especially Medicare and Social Security. He has repeatedly pointed out that both entitlement programs are headed for bankruptcy and must be reformed.

Why the GOP Wants to Gut Social Security - A group of Republican lawmakers has a proposal that would slash Social Security benefits for virtually everyone. The plan, headed by House Ways and Means Social Security Subcommittee Chairman Sam Johnson and introduced on December 8, would destroy the basic structure of Social Security. Social Security funds are projected to start running out over the next 20 years, which means citizens could face across-the-board taxes to cover the costs if no other reforms are agreed upon in Congress. Johnson's Social Security Reform Act of 2016 proposes to eliminate the funding gap by implementing huge benefit reductions while at the same time giving tax cuts to affluent retirees. The Social Security Office of the Actuary estimates that this plan would cut $2 trillion from the fund, without asking for any taxes to help bolster the program. With fewer dollars available, the plan would reduce the amount paid out in cost of living expenses and raise the retirement age to 69, thus decreasing payouts by $13.9 trillion. For retirees with average lifetime earnings of $28,000 to 49,000, benefits would decrease by 28 percent. Since the program is already not keeping up with rising prices, seniors have been asking Congress to approve higher cost of living increases; Johnson's plan goes in the opposite direction, reducing cost of living benefits even further. To put this in perspective: Currently, the system's 39 million retired workers draw average benefits of less than $16,000 per year, hardly enough for a dignified retirement. But under the GOP plan, even that would be cut by about a third.

Daily Kos Founder Gleefully Celebrates Coal Miners Losing Health Insurance -- Daily Kos publisher and Vox Media co-founder Markos “Kos” Moulitsas, an influential voice in liberal politics, published a blog post (Daily Kos, 12/12/16) that captures just how terribly leading Democratic pundits are taking Hillary Clinton’s unexpected defeat. In the wake of this loss, some of the more hardcore Clinton partisans have chosen, in lieu of self-examination and internal criticism, to simply lash out at the voters they failed to win over. With the punitive glee of a medieval executioner, Moulitsas proclaimed: “Be Happy for Coal Miners Losing Their Health Insurance. They’re Getting Exactly What They Voted For”: For example, why should we weep for the retired coal miners who will now lose their health insurance thanks to the GOP majority—despite the best efforts of coal-state Democrats to change the outcome? Yes, this will be a terrible outcome for a group of people who have really drawn a shitty lot in life. But how sorry should we be for this crowd? Coal country swung hard for Donald Trump, winning 70 to 80 percent of the vote in some of these counties. So a major voice in liberal media is now not only morally justifying millions of working people losing their health insurance, but actually insisting we be “happy” for it? Moulitsas went on to evoke a classic right-wing dictum about people getting the democracy they deserve:Don’t weep for these coal miners, now abandoned by their GOP patrons. They are getting exactly the government that they voted for. Democrats can no longer offer unrequited love and cover for them. And isn’t this what democracy is all about? They won the election! This is what they wanted!

Hospitalized Patients Treated by Female Doctors Show Lower Mortality - From the Harvard School of Public Health: Hospitalized patients treated by female physicians show lower mortality, readmission rates. Elderly hospitalized patients treated by female physicians are less likely to die within 30 days of admission, or to be readmitted within 30 days of discharge, than those cared for by male physicians, according to a new study led by researchers at Harvard T.H. Chan School of Public Health. It is the first research to document differences in how male and female physicians treat patients result in different outcomes for hospitalized patients in the U.S. The researchers estimated that if male physicians could achieve the same outcomes as their female colleagues, there would be 32,000 fewer deaths each year among Medicare patients alone—a number comparable to the annual number of motor vehicle accident deaths nationally. The study was published online December 19, 2016 in JAMA Internal Medicine. There’s more. The sickest patients appear to benefit most from treatment by female doctors: “The difference in mortality rates surprised us,” said lead author Yusuke Tsugawa, research associate in the Department of Health Policy and Management. “The gender of the physician appears to be particularly significant for the sickest patients. These findings indicate that potential differences in practice patterns between male and female physicians may have important clinical implications.” The study offers some clues as to why this is the case, noting that “for example, female physicians are more likely to adhere to clinical guidelines and provide more patient-centered communication.” But it also notes that much more information is needed. For example, “patient selection” is not a factor: “When the researchers restricted their analysis to hospitalists — physicians focused on hospital care, to whom patients are randomly assigned based on work schedule — the results remained consistent, suggesting that patient selection, in which healthier patients might choose certain types of doctors, didn’t explain the results.” One of the differences between male and female doctors is that, as you might imagine, women doctors are paid less and promoted less frequently. Another, noted above, is their communications styles tend to differ, with female physicians communicating in a more “patient-centered” manner. It’s not known, though, whether these factors account for the difference in outcomes. “There was ample evidence that male and female physicians practice medicine differently. Our findings suggest that those differences matter and are important to patient health. We need to understand why female physicians have lower mortality so that all patients can have the best possible outcomes, irrespective of the gender of their physician,” said senior author Ashish Jha.

OxyContin goes global — “We’re only just getting started” - OxyContin is a dying business in America. With the nation in the grip of an opioid epidemic that has claimed more than 200,000 lives, the U.S. medical establishment is turning away from painkillers. Top health officials are discouraging primary care doctors from prescribing them for chronic pain, saying there is no proof they work long-term and substantial evidence they put patients at risk. Prescriptions for OxyContin have fallen nearly 40% since 2010, meaning billions in lost revenue for its Connecticut manufacturer, Purdue Pharma. So the company’s owners, the Sackler family, are pursuing a new strategy: Put the painkiller that set off the U.S. opioid crisis into medicine cabinets around the world. A network of international companies owned by the family is moving rapidly into Latin America, Asia, the Middle East, Africa and other regions, and pushing for broad use of painkillers in places ill-prepared to deal with the ravages of opioid abuse and addiction. In this global drive, the companies, known as Mundipharma, are using some of the same controversial marketing practices that made OxyContin a pharmaceutical blockbuster in the U.S. In Brazil, China and elsewhere, the companies are running training seminars where doctors are urged to overcome “opiophobia” and prescribe painkillers. They are sponsoring public awareness campaigns that encourage people to seek medical treatment for chronic pain. They are even offering patient discounts to make prescription opioids more affordable.

Pharma Execs Arrested in Shockingly Organized Scheme to Overprescribe Notorious Opioid -- On Thursday, the Centers for Disease Control and Prevention released data showing that overdose deaths caused by synthetic opioids such as fentanyl—the drug that killed Prince—rose by nearly 75 percent in 2015. On the same day, federal prosecutors in Massachusetts announced the arrest of six former employees, including a former CEO and two former vice presidents, of the Phoenix-based and NASDAQ-traded fentanyl producer Insys Therapeutics. The individuals are charged with bribing doctors and otherwise conspiring to induce the overprescription of a fentanyl product called Subsys. The indictment details a variety of brazenly dishonest methods by which doctors and insurance companies were allegedly convinced to issue and fund prescriptions of Subsys:

Insys paid doctors to give educational lectures about the use of Subsys. That's ostensibly legal, except that prosecutors allege that the company paid said doctors in direct proportion to the frequency with which they wrote Subsys prescriptions… These "lectures," meanwhile were allegedly often nothing more than dinners at high-end restaurants attended only by the doctors getting paid, the Subsys employees paying them, and the doctor's friends. One Florida doctor is alleged to have made $275,000 in speaking fee bribes in three years.

Insys allegedly continued to work with some doctors who prescribed Subsys frequently even after becoming aware internally that those doctors were known for running dubiously legal Dr. Feelgood "pill mills." Wrote one Insys employee in an email about an Illinois doctor that the company would continue to work with and pay speaking fees to: "He is extremely moody, lazy and inattentive. He basically just shows up to sign his name on the prescription pad, if he shows up at all."

Insys allegedly hired support staff employees to mislead insurance companies into approving payments for Subsys prescriptions. These support staff employees allegedly misled insurers into believing they were interacting with representatives of doctor's offices rather than representatives of Insys—employees were allegedly instructed to hang up the phone when insurers "pursued the identity of their employer." These support staff employees are also accused of systematically falsifying specific diagnosis information—claiming patients had difficulty swallowing, for example—that they knew would make insurers more likely to authorize Subsys purchases.

Drug firms poured 780M painkillers into WV amid rise of overdoses -- Follow the pills and you'll find the overdose deaths.The trail of painkillers leads to West Virginia's southern coalfields, to places like Kermit, population 392. There, out-of-state drug companies shipped nearly 9 million highly addictive — and potentially lethal — hydrocodone pills over two years to a single pharmacy in the Mingo County town. Rural and poor, Mingo County has the fourth-highest prescription opioid death rate of any county in the United States.The trail also weaves through Wyoming County, where shipments of OxyContin have doubled, and the county's overdose death rate leads the nation. One mom-and-pop pharmacy in Oceana received 600 times as many oxycodone pills as the Rite Aid drugstore just eight blocks away. In six years, drug wholesalers showered the state with 780 million hydrocodone and oxycodone pills, while 1,728 West Virginians fatally overdosed on those two painkillers, a Sunday Gazette-Mail investigation found. The unfettered shipments amount to 433 pain pills for every man, woman and child in West Virginia. “These numbers will shake even the most cynical observer,” said former Delegate Don Perdue, D-Wayne, a retired pharmacist who finished his term earlier this month. “Distributors have fed their greed on human frailties and to criminal effect. There is no excuse and should be no forgiveness.” The records disclose the number of pills sold to every pharmacy in the state and the drug companies' shipments to all 55 counties in West Virginia between 2007 and 2012.The wholesalers and their lawyers fought to keep the sales numbers secret in previous court actions brought by the newspaper.The state's southern counties have been ravaged by a disproportionate number of pain pills and fatal drug overdoses, records show.The region includes the top four counties — Wyoming, McDowell, Boone and Mingo — for fatal overdoses caused by pain pills in the U.S., according to CDC data analyzed by the Gazette-Mail. Another two Southern West Virginia counties — Mercer and Raleigh — rank in the top 10. And Logan, Lincoln, Fayette and Monroe fall among the top 20 counties for fatal overdoses involving prescription opioids.

How hospitals, nursing homes keep deadly 'superbug' outbreaks secret: The outbreak started in January 2014. That’s when a resident of the Casa Maria nursing home here was diagnosed with Clostridium difficile, a highly contagious and potentially deadly “superbug” that plagues hospitals, nursing homes and other healthcare facilities. By the end of February, six more Casa Maria residents were suffering from the infection, characterized by fever, abdominal cramps and violent diarrhea. Under New Mexico regulations, healthcare facilities must report a suspected outbreak of C. difficile to the state Health Department within 24 hours. But Casa Maria staff did not contact authorities until March 4, 2014. By then, nine of the nursing home’s 86 residents had active infections. When a Health Department staffer called Casa Maria the next day to follow up, the nursing home again denied it had an outbreak. By June, the outbreak was over. Fifteen residents had been infected, and eight were dead. The public was never informed — until now.The outbreak and the way it was handled expose what a Reuters investigation found to be dangerous flaws in U.S. efforts to control the spread of superbug infections. An examination of cases across the country reveals a system that protects the healthcare facilities where superbugs thrive, while leaving patients, their families and the broader public ignorant of potentially deadly threats. Every year, hundreds of thousands of Americans are sickened and tens of thousands die from infections by antibiotic-resistant bacteria and C. difficile, a pathogen linked to long-term antibiotic use. Timely reporting of outbreaks of these infections is essential to stopping the spread of disease and saving lives, public health experts and patient advocates say. Yet the United States lacks a unified nationwide system for reporting and tracking outbreaks. Instead, a patchwork of state laws and guidelines, inconsistently applied, tracks clusters of the deadly infections that the federal government 15 years ago labeled a grave threat to public health.

Sales of Antibiotics for Livestock Surges Despite Industry Pledges to Cut Back - Scientists and regulators have sounded the alarm linking the overuse of antibiotics in livestock production with helping to increase the creation and spread of antibiotic resistant infections. Three years ago, as a result, the U.S. Food and Drug Administration (FDA) launched a voluntary program seeking to curb some livestock drug uses. But the widespread use of these antibiotics seems to continue as before. On Thursday, the latest FDA figures on antibiotics sold for use in meat and poultry production came out. The news is not good. Sales just keep rising. Against the backdrop of a crisis in now untreatable or nearly untreatable infections, this report further underscores how urgently we need more and stronger government action to address the ongoing overuse of the drugs in livestock. Sales of medically important antibiotics—including penicillins, cephalosporins, tetracyclines and erythromycins, to name a few—for livestock were up 2 percent over 2014, and up 26 percent overall from 2009 through 2015. An overwhelming 95 percent of human antibiotics were sold as additives to animal feed and drinking water—routes of delivery that are typical of growth promotion or disease prevention. More than 21.3 million pounds of medically-important drugs were sold for use in livestock last year. By comparison, the FDA reports that in 2011 (the last year for which it has such data, apparently) a bit more than 7.2 million pounds of antibiotics were sold for use in human medicine. In other words, just under 70 percent of all medically important antibiotics in the U.S. are sold for use in animals, not people. In 2015, 97 percent of all medically important antibiotic sales for livestock or poultry were over-the-counter, meaning they were sold without a prescription and typically without any oversight by a veterinarian. It remains unclear how effective FDA's current voluntary efforts will be to reduce the routine use of antibiotics in livestock and poultry production.

The Latest Zika News Is More Bad News - It’s been a busy week for Zika news. Local spread of Zika virus in Brownsville, Texas, led to a travel advisory for the area this week, just as multiple studies were published detailing what percentage of fetuses are affected among women who are infected during pregnancy and how the virus spreads. A new study published in the New England Journal of Medicine found that in Rio de Janeiro, 42 percent of women infected with Zika during pregnancy were found to have given birth to infants with severe abnormalities. A second study from the U.S. Centers for Disease Control and Prevention found that among pregnant women with potential Zika infection in the U.S., 11 percent had a fetus or infant with a birth defect. There are several potential explanations for the discrepancy: Anomalies from in utero exposure to Zika have shown up well after birth in some cases, and the Brazil study had a longer follow-up period, meaning that they may have caught more of the later manifestations. Additionally, the Brazil study is only tracking women with symptomatic cases of Zika, and scientists have hypothesized that those showing symptoms, which is just a fraction of all infections, may be more likely to have babies with abnormalities. Infants in Brazil are also generally more likely to be born with abnormalities than those in the United States. This week, researchers at the CDC also found evidence of how Zika virus replicates in fetal brains, causing microcephaly and other neurological disorders. The severity of the threat of Zika on pregnant women and newborns puts Cameron County, where Brownsville is located, in a tough position. After five people tested positive for Zika in an eight-block area, the CDC, Texas Department of State Health Services and the Cameron County Department of Health and Human Services all recommended that women in Brownsville talk with their doctors if they are thinking about getting pregnant and be tested for Zika if they are pregnant. That’s good advice, but many women in Cameron County don’t appear to have a doctor; around a quarter of women in Cameron receive little to no prenatal care..

El Niño on a warming planet may have sparked the Zika epidemic, scientists report - In a world characterized by rising temperatures, deforestation and other human influences on the environment, the spread of infectious disease is a hot topic. Many recent studies suggest that environmental changes can affect the transmission of everything from malaria to the Zika virus — and it’s increasingly important to understand these links, scientists say. This week, a new study has provided new evidence that environmental changes can increase the threat of disease. It concludes that unusually warm temperatures caused by 2015’s severe El Niño event — probably compounded by ongoing climate change — may have aided in the rapid spread of the Zika virus in South America that year. And while there are many complex factors at play in the spread of mosquito-borne diseases, the study may help scientists better prepare for the kinds of future effects we might see in our warming world. “The start of the mission was simple — trying to address where the risk will be, where is it going to move next, where could Zika happen on the planet on a global scale,” To that end, the authors designed a study that would help them determine how climatic changes have impacted the mosquito-borne transmission of Zika. The model produced an unusually high disease transmission potential in the tropics for the year 2015, including in Colombia and Brazil, the countries hit hardest by Zika. Similar results occurred between 1997 and 1998, one of the only other times on record to experience such a brutal El Niño event. “[O]ur model indicates that the 2015 El Niño event, superimposed on the long-term global warming trend, has had an important amplification effect,”

Future of Glyphosate Unclear After EPA Panel Review | KTIC Radio: The future of glyphosate — the most widely used herbicide in the world — is uncertain after a four-day review of the Environmental Protection Agency’s (EPA) scientific evaluation of the chemical’s cancer-causing potential. The 15 scientists were assembled by the EPA to analyze glyphosate, the active ingredient in Monsanto’s Roundup and dozens of other weed killers. The researchers struggled to reach a consensus amid a plethora of conflicting and, in some cases, flawed data on the health and environmental effects of the chemical. The scientists now have three months to make a formal recommendation to EPA. That recommendation could strongly influence the agency’s decision on whether it should impose new restrictions on how glyphosate is used. Given the widespread use of glyphosate in US agriculture, any restrictions on its use could have wide-reaching effects. The amount of the chemical used has grown exponentially over the past 30 years and now approaches 300 million pounds annually, according to data the EPA presented to the scientists. Monsanto insists that glyphosate is safe. “The overwhelming conclusion of experts worldwide, including the EPA, has been that glyphosate can be used safely. No regulatory agency in the world considers glyphosate to be a carcinogen.” Charla Lord, a Monsanto spokeswoman, said.However, the scientists assembled by EPA were not as certain. They spent four days analyzing scientific studies on links between glyphosate and cancer. The event included one and a half days devoted solely to hearing comments from the public. The scientists especially looked at a type of immune system cancer called non-Hodgkin’s lymphoma (NHL) that farmers suffer at higher rates than other occupational groups.

Pesticides stop bees buzzing and releasing pollen, says study - The world’s most widely used insecticides harm the ability of bees to vibrate flowers and shake out the pollen to fertilise crops, according to preliminary results from a new study. Some flowers, such as those of crops like tomatoes and potatoes, must be shaken to release pollen and bumblebees are particularly good at creating the buzz needed to do this. But the research shows that bumblebees exposed to realistic levels of a neonicotinoid pesticide fail to learn how to create the greatest buzz and collect less pollen as a result. The research is consistent with previous work that has shown neonicotinoid pesticides reduce learning and memory in bees. A moratorium on the use of three neonicotinoids on flowering crops was put in place in Europe in 2013 and will be reviewed next year. In many flowers, bees collect pollen by simply brushing it off the anthers (the part of the stamen that contains the pollen), but other flowers require more work. “So bees produce a vibration – or buzz – to shake pollen out of these anthers like a pepper pot,” said Penelope Whitehorn of the University of Stirling in Scotland, who led the study. “The bee lands on a flower, curls her body around the anther and grips the base with her mandibles. She then rapidly contracts the flight muscles to produce the vibration, without beating her wings.”The researchers took two colonies of bumblebees in a laboratory setting and split the bees in each into three groups. One control group was not exposed to the neonicotinoid thiamethoxam, but the other two groups were fed solutions containing two parts per billion or 10ppb of the pesticide, doses similar to those found in crop fields. After each visit to the buffalo-bur flowers used in the experiment, the bees in the control group learned how to buzz more pollen out of the anthers. But those in the 10ppb group did not improve at all.

EPA Puts 72 Inert Pesticide Ingredients on the Chopping Block - The U.S. Environmental Protection Agency (EPA) is taking action to remove 72 ingredients from its list of inert ingredients approved for use in pesticide products. Manufacturers wishing to use these ingredients in the future will have to provide EPA with studies or information to demonstrate their safety. EPA will then consider whether to allow their use. EPA is taking this action in response to petitions by the Center for Environmental Health, Beyond Pesticides, Physicians for Social Responsibility, and others. These groups asked the agency to issue a rule requiring disclosure of 371 inert ingredients found in pesticide products. Instead, EPA will evaluate potential risks of inert ingredients and reduce risks, as appropriate. Many of the 72 inert ingredients removed with this action are on the list of 371 identified by the petitioners as hazardous. EPA is taking this action after considering public comments on its October 2014 proposal. EPA’s list of approved inert ingredients will be updated after the Federal Register publication. Most pesticide products contain a mixture of different ingredients. Ingredients that are directly responsible for controlling pests such as insects or weeds are called active ingredients. An inert ingredient is any other substance that is intentionally included in a pesticide that is not an active ingredient. For the list of 72 chemical substances, see the Federal Register Notice in docket # EPA-HQ-OPP-2014-0558.

EPA doesn't have to set water limits for 2 fertilizers (AP) — A federal judge has given the Environmental Protection Agency more time to work with states on limiting their runoff of chemicals blamed for oxygen-depleted "dead zones" in the Gulf of Mexico and elsewhere. Scientists say nitrogen and phosphorus carried down the Mississippi River stimulate plankton blooms that decompose on the sea floor each summer, using up so much oxygen that life cannot be supported in vast stretches of the Gulf of Mexico. Farm runoff is the biggest source of these chemicals in the Mississippi watershed, according to the EPA. Other sources include storm runoff from cities and towns, poorly treated sewage, fossil fuels, home fertilizers, pet waste and even some soaps and detergents. A federal judge ordered the EPA three years ago to set firm limits for the chemicals in water, but an appeals court overruled him, and the agency says it wants to keep working with states on alternative solutions. The 11 environmental groups suing the agency contend that numerous pollution-reduction plans went nowhere because the EPA never acted directly, and states have failed to solve the problem. Farmers have done a great deal to reduce runoff pollution, said Don Parrish, director of government affairs for the American Farm Bureau Federation, one of nearly 60 groups, including 15 state farm bureaus and nearly 20 corn and pork production groups, that joined the suit as intervenor defendants. Parrish said such work includes technology to apply different amounts of fertilizer in different parts of a field, and splitting fertilizer over two or more applications instead of all at once.

Policy like EPA’s Clean Power Plan would mean higher crop yields - After the Supreme Court ruling clarifying that the EPA had an obligation to regulate carbon dioxide emissions, the Environmental Protection Agency developed the Clean Power Plan to target greenhouse gases. That’s not the only pollutant that is reduced by cutting emissions and moving away from coal for power generation, though. Limiting the rest of the stuff that comes out the smokestack has health and economic benefits, as well—“co-benefits” in the policy lingo. One type of pollution on that list is the compounds that react to produce ozone in the lower atmosphere. While ozone up in the stratosphere shields us from skin-burning UV radiation, ozone at the surface is a lung irritant. It harms plants, as well, reducing the uptake of CO2 that fuels growth. A recent study led by Drexel University’s Shannon Capps and Syracuse University’s Charles Driscoll examines the impact that the Clean Power Plan would have on yields of several susceptible crops and the growth of a handful of tree species. They compare several emissions scenarios. The baseline scenario projects fossil fuel use trends with no new pollution regulations. Three other scenarios apply different sorts of pollution reductions. In a scenario similar to the Clean Power Plan, CO2 emissions from US power plants drops almost 24 percent, and the nitrogen oxide emissions that yield ozone drops 22 percent. Using a model that simulates the chemistry of drifting pollution emitted by US power plants, they calculate the differences in local ozone concentrations between these scenarios. From there, the researchers estimate the impacts on crops and trees that have been ozone experiments. In the baseline scenario, surface ozone reduces the total national yield of soybeans, potatoes, and cotton in the year 2020 by 1.5 to 2 percent. (A previous estimate using different methods calculated losses as high as 14 percent for soybeans in the year 2000, partly due to higher ozone concentrations.) The Clean-Power-Plan-like scenario makes the biggest dent in those reductions, knocking them down by 0.1 percent or so. That may not sound like a ton, but it means roughly $37 million more in soybeans each year, plus $10 million more between corn, potatoes, and cotton.

Chemical Sector Concerned About EPA Evaluations of New Materials - Chemical industry groups are reportedly urging the Environmental Protection Agency to alter its evaluation procedures amid a growing backlog of applications for new chemicals.Chemical Watch reports that several groups complained to agency officials at a public meeting last week.The Lautenberg Chemical Safety Act, which passed this summer, overhauled the nation's chemical evaluation process for the first time in 40 years — including a stipulation that the EPA issue affirmative decisions about new substances.The industry broadly supported the long-overdue changes to chemical laws, but groups said last week that the EPA should reconsider new procedures related to new chemicals.The American Chemistry Council indicated that 350 filings for new chemicals — known as pre-manufacture notices — were pending when the Lautenberg Act was passed. After the law took effect, 200 additional substances were filed and just 27 were cleared by the agency."Right now, innovation is stuck, because completion of new chemical reviews has ground to a halt," the ACC's Karyn Schmidt wrote prior to the meeting, according to CW.The American Petroleum Institute and American Alliance for Innovation also reportedly voiced concerns about the current process. EPA officials, meanwhile, countered that companies could speed up the evaluations by including more information in their applications, and the Environmental Defense Fund rejected industry arguments that the government should focus on innovation and production in the U.S. chemical sector.

EPA REFUSES To Explain Why It Let Pollution Sit For DECADES - Environmental Protection Agency (EPA) officials refuse to explain why they let pollution fester at up to 302 highly-contaminated sites under their authority for years or even decades. They also won’t explain what they’re doing to protect people’s health. The EPA doesn’t know what dangers exist at 191 sites, and humans face health risks at another 111, an investigation from The Daily Caller News Foundation revealed Monday. Pollution has threatened human health at up to 117 Superfund sites for more than 30 years. EPA officials refused to explain why cleaning or even just assessing pollution risks has taken so long.“I don’t think we will be providing anything further,” Associate Administrator Frank Benenati told The DCNF after he was emailed the link to the investigation Monday. Benenati is also the EPA’s chief spokesman. The EPA ignored multiple DCNF requests regarding the Superfund investigation over a three-day period before Benenati ultimately responded just hours before deadline. The Superfund program was formed to decontaminate the nation’s most polluted sites. The DCNF provided the EPA with thorough details about the forthcoming report, which included substantial data points that would be incorporated. A reporter also detailed the rebuttals that would be used to counter explanations the agency provided months ago regarding why Superfund decontamination took so long. EPA ignored these details and failed to provide comment on any preventative or precautionary measures it had taken to avert human exposure to contaminants at these sites. A 2007 Center for Public Integrity investigation (CPI) into Superfund revealed similar findings as The DCNF. The CPI also had trouble acquiring public information.

House GOP Quietly Closes Flint, Mich. Water Investigation -- Congressional Republicans quietly closed a year-long investigation into Flint, Michigan's crisis over lead in its drinking water, faulting both state officials and the Environmental Protection Agency for contamination that has affected nearly 100,000 residents. In letters to fellow Republicans, the chairman of the House Oversight and Government Reform Committee said Friday that Michigan and federal officials were slow in detecting high levels of lead in the water and did not act fast enough once the problem was discovered. The committee findings offer no new information and essentially summarize what emerged during several high-profile hearings earlier this year."The committee found significant problems at Michigan's Department of Environmental Quality and unacceptable delays in the Environmental Protection Agency's response to the crisis," wrote Rep. Jason Chaffetz, R-Utah. "The committee also found that the federal regulatory framework is so outdated that it sets up states to fail." Flint's drinking water became tainted when the city switched from the Detroit water system and began drawing from the Flint River in April 2014 to save money. The impoverished city was under state control at the time. Regulators failed to ensure the water was treated properly and lead from aging pipes leached into the water supply. After nearly a year of haggling, Congress cleared legislation last week to provide $170 million to deal with the Flint crisis and help other communities with lead-tainted water. In his letters to fellow GOP lawmakers, Chaffetz cites "a series of failures at all levels of government" that "caused and then exacerbated the water crisis.

Former Flint emergency managers, others charged in water crisis | Reuters: Michigan prosecutors on Tuesday charged four former government officials in Flint, including two city emergency managers, with conspiring to violate safety rules in connection with the city's water crisis that exposed residents to dangerous levels of lead. Former state-appointed emergency managers Darnell Earley and Gerald Ambrose and former city employees Howard Croft, a public works superintendent, and Daugherty Johnson, a utilities manager, were the latest to be charged in the case, Attorney General Bill Schuette said. The defendants conspired to operate the city's water treatment plant when it was not safe to do so, he told a news conference in Flint. "Flint was a casualty of arrogance, disdain and failure of management, an absence of accountability," Schuette said. Michigan has been at the center of a public health crisis since last year, when tests found high amounts of lead in blood samples taken from children in Flint, a predominantly black city of about 100,000. Asked whether the investigation would lead to charges against higher-placed state officials, Schuette reiterated that no one was excluded. Some critics have called for high-ranking state officials, including Michigan Governor Rick Snyder, to be charged. Snyder has said he believed he had not done anything criminally wrong.

Flint Water Crisis: Michigan AG Pursues Felony Indictments Against Former Emergency Managers - Jerri-Lynn Scofield --We’ve become all too inured over the last several years to seeing the obviously guilty walk away from one corporate or public policy crisis after another, with nary a slap on the wrist. Against that backdrop, I see some wee cause for optimism in yesterday’s news from Flint, Michigan, of all places– a place usually not synonymous with optimism, especially as it has recently endured its water crisis. As reported today by the Detroit Free Press in this article: Michigan Attorney General Bill Schuette’s criminal investigation of the Flint water crisis moved a step closer to the highest levels of state government Tuesday as he brought felony charges against two former emergency managers who reported to former Treasurer Andy Dillon and were appointed by Republican Gov. Rick Snyder. Schuette, who also charged two former City of Flint public works employees Tuesday, would not say how far the investigation would go, only that it will follow the evidence and nothing is off the table.“We are closer to the end than we are to the beginning,” he told reporters. Schuette charged Darnell Earley and Gerald Ambrose, both former Emergency Managers, with multiple 20-year felonies– conspiracy and false pretences charges– for failing to protect Flint citizens from health hazards caused by contaminated drinking water. I should emphasize that both managers were appointed by Governor Snyder, under the authority of the state’s emergency management law. Schuette also announced that Earley and Ambrose, along with ex-City of Flint executives Howard Croft and Daugherty Johnson, also face felony charges of false pretenses and conspiracy to commit false pretences arising from the roles they played in arranging bond issuances to pay for a portion of a water project described in greater detail below. The latest criminal charges are the third round of criminal charges brought in this investigation by Schuette, who has also previously filed a round of civil law suits against two water supply engineering firms, Veolia and Lockwood. Schuette has thus far filed a total of 43 criminal charges against 13 current and former state and local officials since the start of his investigation, and has interviewed approximately 200 witnesses.

Nearly 3,000 U.S. Communities Have Lead Levels Higher Than Flint, Reuters Reports -- A Reuters investigation this week uncovered nearly 3,000 different communities across the U.S. with lead levels higher than those found in Flint, Michigan , which has been the center of an ongoing water contamination crisis since 2014. The investigation found that many of the hot-spots are receiving little attention or funding. Local healthcare advocates said they hope the reporting will spur action from influential community leaders. All of the communities Reuters investigated had lead levels at least two times higher than Flint's; more than 1,000 were four times higher. In most cases, the local data covered a 5- to 10-year period through 2015, the analysis states. Areas affected by lead poisoning populate the map from Texas to Pennsylvania, reported Reuters' M.B. Pell and Joshua Schneyer. The available data charts 21 states that are home to about 61 percent of the U.S. population. Despite the massive drop in lead poisoning rates since the 1970s—when heavy metals were phased out of paint and gasoline—many communities throughout the country are still at risk. “The national mean doesn't mean anything for a kid who lives in a place where the risks are much higher," Like Flint, many of the communities are mired in "legacy lead," Reuters reported—old industrial waste, crumbling paint or corrosive pipes. But few have received help or attention. Contamination in children can cause cognitive difficulties, which in turn can lead to low school performance, few job opportunities and trouble with the law. That cycle was examined last year when 25-year-old Baltimore resident Freddie Gray died after his spine was severed in police custody. Amid protests against brutality and racism, many noted that Gray experienced lead poisoning as a child while living in an area with persistently high exposure levels. But the problem is nationwide and affects a vast spectrum of communities, Reuters writes. Milwaukee, Wisconsin still has "135,000 prewar dwellings with lead paint and 70,000 with lead water service lines" and $50 million has already been spent to protect the city's children. Many families do not have the funds to make the repairs themselves and laws requiring owners to remove lead from their properties are not consistent state by state.

Brazil’s coffee growers face bleak future as world warms - As a famous old song says, they’ve got an awful lot of coffee in Brazil. But if the findings of an Australian research institute are right, that will change over the next 30 years. Although Brazil, the world’s biggest coffee producer and exporter, is expecting a record harvest this year, its coffee crop − like that of 70 other producer countries − is now being threatened by climate change. A report by the independent Climate Institute concludes that, by 2050, the world’s present growing area will have been halved by global warming. It warns: “Climate change is already putting production and cost pressures on the supply of coffee in significant parts of the world’s ‘bean belt’ of coffee-producing countries. “Increasing temperatures and extreme weather events will cut the area suitable for production by up to 50%, erode coffee quality, and increase coffee prices for consumers.” “Over 2.25 billion cups of coffee are consumed around the world every day. World coffee production has more than trebled since the 1960s to supply the $US19 billion trade that continues to deliver a 5% increase in consumption annually. “Yet between 80% and 90% of the world’s 25 million coffee farmers are smallholders, who are among those most exposed to climate change. “They generally live and work in the ‘bean belt’, which comprises around 70 mostly developing countries, including Guatemala, Brazil, Vietnam, Colombia, Ethiopia and Indonesia. Climate change threatens their world.”

How climate change could affect food prices -- According to a 2015 report from the World Food Programme (WFP), climate change presents risks to the whole food system, from production, through distribution to consumption. Since the U.S. produces 40 percent of the world’s corn, production shocks in the U.S. impact global prices. The U.N. Environment Programme (UNEP) reinforces that climate change is happening, yet uncertainties remain over the direction and magnitude of some changes. It is only a matter of time before food prices are discernibly affected. This impact could be a hardship for consumers.According to Dr. Brian Gould, a professor in the Agricultural and Applied Economics Department at the University of Wisconsin—Madison, “It is hard to say how climate change will affect food prices. In the short term, weather patterns will impact supply. Long term, it really depends on the extent of the changes. However, increased drought risk will affect the stability and prices of food.” A National Climate Assessment by the U.S. government agrees that it is hard to forecast developments on supply chains, but more incidents of extreme heat, severe drought, and heavy rains will affect foodproduction and prices. An article released by Columbia University concluded that future drought conditions in the Western U.S. are likely to add significant stress on both natural ecosystems and agriculture. Additionally, the WFP stated that an increase in population combined with climate change means that food prices will rise significantly.

The Future of Food Production in a World Shocked by Climate Change - As the world urbanizes and faces more severe climate change, what will we eat? It appears that we will have a lot of marijuana to smoke but what will we have to eat? An interesting panel just convened at Harvard to discuss this but no economists were invited. Permit me to make several points.
1. Nations that drop their tariffs and quotas on agricultural imports will more easily adapt. Yes, these pro-competition actions will hurt domestic farmers but they will help urban consumers. Why? High domestic heat will lead local farmers to grow less output but supermarket prices won't rise as the local supermarket will stock the shelves with foreign imports that were not exposed to the same heat (the heat's impact at any point in time differs greatly around the world).
2. We need futures markets for agricultural output that go out more than 2 years into the future. Such scarcity signals would help both the demand side and supply side to respond. For example, if the price of oranges in the year 2022 is expected to triple from today's price (and this would be revealed by forward markets), this is very useful information. You don't have to be Hayek to see how this information would help us to adapt.
3. Declines in transportation costs (due to larger container ships and freezing technology and computerization) all help us to adapt. Why? The world is a big place. At any point in time agriculture in a given place like Kansas is not hurt by an agricultural shock while in some part of Siberia , agriculture could be having a great year. Such spatial variation creates a type of diversification. As transportation costs decline, the booming places can ship agricultural output to urban consumers. No starvation in this case, and little international volatility in prices -- just trade taking place.
4. Nations can insure against agricultural risk by spatial diversification in the cross-section (see point #3) above or they store produce. Fruit can be dried and stored for two years. Basic ideas from inventory theory and risk smoothing matter here.
5. Agriculture will move north into Canada. There is a lot of room up in Canada. Kansas and Iowa may redeploy their land for other purposes. For example, in a world of Elon Musk hyperloops they can become suburbs of Chicago. Kansas is 750 miles to Chicago. If the hyperloop can move at 750 mph , then this is just 1 hour away.

California forests failing to regrow after intense wildfires -- There are warning signs that some forests in the western U.S. may have a hard time recovering from the large and intense wildfires that have become more common as the climate warms.After studying 14 burned areas across 10 national forests in California, scientists from UC Davis and the U.S. Forest Service said recent fires have killed so many mature, seed-producing trees across such large areas that the forests can't re-seed themselves. And because of increasingly warm temperatures, burned areas are quickly overgrown by shrubs, which can prevent trees from taking root."With high-severity fires, the seed source drops off," said study co-author Kevin Lynch, a forest researcher at UC Davis. "We aren't seeing the conditions that are likely to promote natural regeneration."Historically, severe fires were uncommon in the forests covered by the study, largely made up of yellow pines and mixed conifers, but extended drought and heatwaves have exacerbated fire conditions across the West. The changing climate is also seen as a factor in recent wildfires in the Southeast, which is also mired in drought.For the study, published Wednesday in the journal Ecosphere, the researchers surveyed 1,500 plots in burned areas at different elevations in the Sierra Nevadas, Klamath Mountains, and North Coast regions. There was no natural conifer regeneration at all in 43 percent of the plots, they reported. "[O]ur data support growing concern that the well-documented trend toward larger and more severe fires is a major threat to conifer forest sustainability in our study region," the authors wrote. They said the study results could apply to mixed conifer forests across the West.

22 Million Pounds of Plastic Enters the Great Lakes Each Year - U.S. and Canada together discard 22 million pounds of plastic into the waters of the Great Lakes each year, according to a new Rochester Institute of Technology (RIT) study . Most of it washes up along the shores, accounting for 80 percent of the litter found there. Researchers said that Chicago, Toronto, Cleveland and Detroit are the worst contributors to the plastic pollution. Half of the plastic dumped into the Great Lakes—11 million pounds—goes into Lake Michigan. Lake Erie comes in at number two, receiving 5.5 million pounds. Lake Ontario gets 3 million pounds of plastic waste a year, with Lake Huron and Lake Superior receiving smaller amounts. "This study is the first picture of the true scale of plastic pollution in the Great Lakes," said Matthew Hoffman, assistant professor in RIT's School of Mathematical Sciences and lead author of the study. Plastic pollution in Lake Michigan is approximately the equivalent of 100 Olympic-sized pools full of plastic bottles dumped into the lake every year. Plastic debris in the Great Lakes moves differently than in the ocean. Instead of the free-floating garbage patches that are driven by ocean currents, like the Great Pacific Garbage Patch , plastic in the Great Lakes is carried by winds and currents toward shore. "Most of the particles from Chicago and Milwaukee end up accumulating on the eastern shores of Lake Michigan, while the particles from Detroit and Cleveland end up along the southern coast of the eastern basin of Lake Erie," Hoffman explained. "Particles released from Toronto appear to accumulate on the southern coast of Lake Ontario, including around Rochester and Sodus Bay."

El Nino-linked cyclones to increase in Pacific with global warming: research | Reuters: - Small Pacific island states could be hit by more tropical cyclones during future El Nino weather patterns due to climate change, scientists said on Tuesday. El Nino is a warming of sea-surface temperatures in the Pacific occurring every two to seven years which can trigger both floods and drought in different parts of the world. Its opposite phase, a cooling of the same waters known as La Nina, is associated with the increased probability of wetter conditions over much of Australia and increased numbers of tropical cyclones. Between 2070 and the end of the century, Fiji, Vanuatu, Solomon Islands, Marshall Islands and Hawaii could face an increased frequency in powerful storms during El Nino of up to 40 percent, Australian meteorologists said in a study. However cyclones may be up to 60 percent less frequent during the opposite La Nina pattern, according to the study published in Nature Climate Change magazine. Cyclones bring destructive winds, torrential rain and storm surges that are likely to be exacerbated by rising sea levels caused by global warming, posing a serious threat to Pacific islands, the authors said. "Storm surge...can lead to massive waves propagating far inland, devastating structures and vegetation in its path," co-author Kevin Tory, of the Australia's Bureau of Meteorology (BOM) told the Thomson Reuters Foundation via email. "Salt water inundation can also damage soil, leading to years of reduced agricultural yield," he said.

Earth on Pace for Its Warmest Year on Record - November 2016 was Earth's fifth warmest November since record keeping began in 1880, said NOAA's National Centers for Environmental Information on Monday. November 2016 was 0.7 C (1.31 F) warmer than the 20th-century November average, but 0.23 C (0.41 F) cooler than the record warmth of 2015. NASA reported that November 2016 was the second warmest November in its database , behind November 2015. The difference between the two data sets is, in large part, due to how they handle the data-sparse areas in the Arctic, which was record warm in November. NOAA does not include most of the Arctic in their global analysis, while NASA does. Record warmth was observed across parts of central and southeastern Canada, some areas across the far northern tier of the U.S. along with a portion of the southwest U.S., parts of western and southern Mexico, sections of eastern and west central Africa, a few parts of northern South America, and regions of some southeastern Asia island nations. Cooler-than-average conditions were observed across much of the central Eurasian continent, with monthly temperatures at least 5 C (9 F) below average in central Russia and parts of northeastern Asia. In South America, central Bolivia experienced record cold temperatures during November. A weak La Niña event is now underway in the Eastern Pacific and the cool waters present there have helped cool the planet slightly below the record warm levels observed during the strong El Niño event that ended in May 2016. The fact that November 2016 was still the 2nd to 5th warmest November on record despite the presence of La Niña can mostly be attributed to the steady build-up of heat-trapping greenhouse gases due to human activities. NOAA's global surface temperature for the year so far (January-November 2016) is an impressive 0.94 C (1.69 F) above the 20th-century average and 0.07 C (0.13 F) warmer than the previous January-to-November record, set in 2015. Remarkably, no continental land areas were cooler than average for the year-to-date. It is almost certain that 2016 will end up as the warmest year on record for the planet, giving Earth three consecutive warmest years on record.

Spiking Temperatures in the Arctic Startle Scientists - A spate of extreme warmth in the Arctic over the past two months has startled scientists, who warn that the high temperatures may lead to record-low ice coverage next summer and even more warming in a region that is already among the hardest hit by climate change. In mid-November, parts of the Arctic were more than 35 degrees Fahrenheit warmer than observed averages, scientists said, and at the pole itself, mean temperatures for the month were 23 degrees above normal. Although conditions later cooled somewhat, the extreme warmth is expected to return, with temperatures forecast to be as much as 27 degrees above normal beginning Thursday. Jeremy Mathis, who directs the Arctic Research Program for the National Oceanic and Atmospheric Administration said the warmth had led to a later than usual “freeze-up” of ice in the Arctic Ocean. That in turn may lead to record-low ice coverage in the spring and summer, which could lead to more warming because there will be less ice to reflect the sun’s rays and more darker, exposed ocean to absorb them. “We’re going to be watching the summer of 2017 very closely,” Dr. Mathis said in an interview.Using simulations of the climate, both current and before widespread carbon emissions, they found that the likelihood of extreme temperatures like those that occurred this fall had increased to about once every 50 years from about once every 1,000 years. “A warm episode like the one we are currently observing is still a rare event in today’s climate,” “But it would have been an extremely unlikely event without anthropogenic climate change.”

The Arctic could end a year of record-breaking temperatures with a heat wave -- In a year of record-high temperatures and record-low sea ice, the Arctic appears poised to witness another frightening scenario: temperatures at the North Pole so high that they might even swing above freezing, something not typically seen until May. For the second year in a row, December temperatures in the Arctic are much higher than normal. On Thursday, it’s possible that temperatures could climb as much as 50° F (about 28° C) above normal, bringing temperatures close to, or potentially above, 32° F.Record-low levels of Arctic sea ice might be at least partly responsible for the high temperatures. Ryan Maue, a meteorologist with WeatherBell Analytics, told the Washington Post that the temperatures are being brought to the North Pole by a storm east of Greenland, and that record-low sea ice makes it easier for warm air to travel northward unencumbered. Since roughly September, the Arctic has experienced much warmer than normal temperatures — November was a record 18 degrees above normal, according to the National Snow and Ice Data Center. According to the National Oceanic and Atmospheric Administration’s annual arctic report card, released December 13, surface air temperatures for the Arctic this year have been “by far” the highest since 1900. That warm up has resulted in seriously decreased sea ice, which tied at the end of the summer for the second-lowest minimum extent on record. And that, in turn, helps fuel some of the persistent warming seen at the Arctic, because low sea ice means that more of the sun’s heat is absorbed by the ocean, which in turn slowly releases that heat into the air through fall and winter.

North Pole Temperatures May Soar to 50 Degrees Above Normal - For the second year in a row, the Arctic is facing a late December heat wave (at least by Arctic winter standards). Temperatures are forecast to soar about 50°F above normal, which would bring them near the freezing point at the North Pole. As isolated data points, the back-to-back winter warm-ups would be weird. But taken in the larger context, it’s part of an unsettling trend for a region that is being rapidly reshaped by climate change. A quick recap: Arctic sea ice hit its lowest peak recorded in March (besting the record set in 2015), hit it second-lowest extent recorded in September, and started shrinking in November — at a time when ice should be growing — following a heat wave. Just how much of a heat wave did the Arctic deal with in November? At the North Pole, temperatures in November averaged an astonishing 27°F above normal. Oh, and the Northwest Passage also opened up in August for good measure.Which brings us to December. Warm air has been pouring into the region, but a truly unseasonable blast is forecast for the end of the week. Temperatures across much of the region will be anywhere from 30°-50°F above normal, with the warmest temperatures centered around the North Pole on the eve of Christmas Eve.If you’re wondering where the cold air normally over the Arctic has gone, take a peek at Siberia. Bone-rattling cold will descend on the region, providing the weather equivalent of a lump of coal in thousands of people’s stockings. The warm-Arctic, frigid-Siberia pattern is similar to what happened in November. The atmosphere is again set up in a way that’s funneling warm air into the Arctic via the Bering Strait and North Atlantic. There’s also been a ton of missing sea ice in the region — the result of what’s been a really abnormally warm year for the region all around. That’s left warmer ocean waters exposed, essentially helping lock in warmer-than-normal air temperatures as well.

Pre-Christmas melt? North Pole forecast to warm 50 degrees above normal Thursday - It’s not normal, and it’s happening again. For the second year in a row in late December and for the second time in as many months, temperatures in the high Arctic will be freakishly high compared to normal. Computer models project that on Thursday, three days before Christmas, the temperature near the North Pole will be an astronomical 40-50 degrees warmer-than-normal and approaching 32 degrees, the melting point. On some forecast maps simulating Arctic temperatures, the color bar does not even go as high as predicted levels.The warmth will be drawn into the Arctic by a powerhouse storm east of Greenland. The European weather model estimates its lowest pressure will be around 945 millibars, which is comparable to many category 3 hurricanes. “That’s pretty intense,” said Ryan Maue, a meteorologist with WeatherBell Analytics. Maue explained that depleted sea ice cover east of the Nordic Sea helps create a passageway for warm air to surge north uninhibited. “You have more real estate available to advect the warm and moist air northward,” he said. Arctic sea ice levels are at a record lows. In November, the Arctic usually gains ice, but over a period of five days it saw 19,000 square miles of ice cover vanish, which NOAA called “almost unprecedented”.“The warm ocean acts as a buffer to keep the air temperatures from getting colder,” Labe said. Air temperatures in the Arctic above 80 degrees north (latitude) have been much warmer than normal since roughly September.

North Pole MELTING: Freak weather sees temperatures rise ABOVE freezing point - THE North Pole is on the point of melting with freak weather seeing temperatures creep above freezing point. A weather buoy recorded a mid-winter temperature of 0.4 C (32.7F) on Thursday when, by rights, it should be a perishing minus -30C. Only once in the last 60 years has there been such a bizarre thermometer reading and that was five weeks ago when temperatures 20C above average were recorded. Now, as the North Pole basks in the permanent dark of an Arctic winter, there are reports that vast areas of sea ice are melting. The Washington Post says that preliminary data from the US National Snow and Ice Data Centre indicates that up to 57,000 square miles of ice have melted over the past 24 hours. Zachary Labe, a doctoral student researching Arctic climate and weather at the University of California at Irvine, told the US newspaper on Thursday: “It seems likely areas very close to or at the North Pole were at the freezing point.” He also posted a satellite image of the “pretty dramatic” sea ice retreat around Franz Joseph Land, which is little more than 500 miles from the North Pole. Powerful storms off the Greenland coast appear to be driving the Arctic “heat wave” while the likelihood of it being linked to climatic change is high. Climate Central, an independent organisation of scientists and science commentators, explained how experts have been looking at the way temperatures in the Arctic region have been high to see if climate change is a factor. One of its editorial writers commented: “The answer is climate change made the current heatwave extremely likely. "Though it’s still a rare event, climate change will continue to ratchet up temperatures in the Arctic (and around the world) to the point that this type of warmth will become commonplace in just a few decades.”

NOAA Issues 'Jaw-Dropping' Assessment on 'Unprecedented' Arctic Warming - If President-elect Donald Trump's appointments of a "band of climate conspiracy theorists" weren't already stoking fears for the ever-warming planet, the latest Arctic Report Card from the National Oceanic and Atmospheric Administration (NOAA) may well provide the ignition.The annual assessment, released Wednesday, finds that "persistent warming" is driving "extensive changes" to the region. In fact, the average air temperatures were "unprecendented"—the highest on observational record—and "Arctic temperatures continue to increase at double the rate of the global temperature increase," NOAA states. "Rarely have we seen the Arctic show a clearer, stronger, or more pronounced signal of persistent warming and its cascading effects on the environment than this year," said Jeremy Mathis, director of NOAA's Arctic Research Program. "While the science is becoming clearer, we need to improve and extend sustained observations of the Arctic that can inform sound decisions on environmental health and food security as well as emerging opportunities for commerce," he added. The report's main findings, as noted by NOAA:

Warmer air temperature: Average annual air temperature over land areas was the highest in the observational record, representing a 6.3 degree Fahrenheit (3.5 degree Celsius) increase since 1900. Arctic temperatures continue to increase at double the rate of the global temperature increase.

Record low snow cover: Spring snow cover set a record low in the North American Arctic, where the May snow cover extent fell below 1.5 million square miles (4 million square kilometers) for the first time since satellite observations began in 1967.

Smaller Greenland ice sheet: The Greenland ice sheet continued to lose mass in 2016, as it has since 2002 when satellite-based measurement began. The start of melting on the Greenland ice sheet was the second earliest in the 37-year record of observations, close to the record set in 2012.

Record low sea ice: The Arctic sea ice minimum extent from mid-October 2016 to late November 2016 was the lowest since the satellite record began in 1979 and 28 percent less than the average for 1981-2010 in October. Arctic ice is thinning, with multi-year ice now comprising 22 percent of the ice cover as compared to 78 percent for the more fragile first-year ice. By comparison, multi-year ice made up 45 percent of ice cover in 1985.

Above-average Arctic Ocean temperature: Sea surface temperature in August 2016 was 9 degrees Fahrenheit (5 degrees Celsius) above the average for 1982-2010 in the Barents and Chukchi seas and off the east and west coasts of Greenland.

Arctic Ocean productivity: Springtime melting and retreating sea ice allowed for more sunlight to reach the upper layers of the ocean, stimulating widespread blooms of algae and other tiny marine plants which form the base of the marine food chain, another sign of the rapid changes occurring in a warming Arctic.

Antarctica's sea ice is melting to its lowest levels in recorded history - As previously reported, Arctic sea ice cover was lower in November 2016 than any other November in the satellite record. It turns out that the Arctic was not alone. Sea ice at the other pole, around Antarctica, also reached a record November low. During this time of year, the Arctic Ocean and neighboring seas are refreezing after the annual summer melt season. Conversely, the sea ice fringing Antarctica is normally melting at this time of year, during the austral spring and summer. What is unusual is the amount of melting so far in the Antarctic, spurred by warm air temperatures and shifting winds. The map above shows the average concentration of Antarctic sea ice for November 2016. Opaque white areas indicate the greatest concentration, and dark blue areas are open water. All icy areas pictured here have an ice concentration of at least 15% (the minimum at which space-based measurements give a reliable measure), and cover a total area that scientists refer to as the "ice extent." The ice extent for November 2016 averaged just 14.54 million square kilometers (5.61 million square miles). The yellow line shows the median extent from 1981 to 2010, and gives an idea of how conditions this November strayed from the norm. Specifically, the November extent this year was 1.81 million square kilometers (699,000 square miles) below the 1981 to 2010 average. The melt season started early this year, after Antarctic sea ice reached its annual maximum extent on August 31. By November, the ice reached daily record lows amid air temperatures that were 2 to 4 degrees Celsius (4 to 7 Fahrenheit) above average. Winds that usually disperse the ice instead shifted direction and compressed it around various land areas.

Scientists confirm that warm ocean water is melting the biggest glacier in East Antarctica - Scientists at institutions in the United States and Australia on Friday published a set of unprecedented ocean observations near the largest glacier of the largest ice sheet in the world: Totten glacier, East Antarctica. And the result was a troubling confirmation of what scientists already feared — Totten is melting from below.The measurements, sampling ocean temperatures in seas over a kilometer (0.62 miles) deep in some places right at the edge of Totten glacier’s floating ice shelf, affirmed that warm ocean water is flowing in towards the glacier at the rate of 220,000 cubic meters per second.These waters, the paper asserts, are causing the ice shelf to lose between 63 and 80 billion tons of its mass to the ocean per year, and to lose about 10 meters (32 feet) of thickness annually, a reduction that has been previously noted based on satellite measurements.This matters because more of East Antarctica flows out towards the sea through the Totten glacier region than for any other glacier in the entirety of the East Antarctic ice sheet. Its entire “catchment,” or the region of ice that slowly flows outward through Totten glacier and its ice shelf, is larger than California. If all of this ice were to end up in the ocean somehow, seas would raise by about 11.5 feet.“This ice shelf is thinning, and it’s thinning because the ocean is delivering warm water to the ice shelf, just like in West Antarctica,” said Don Blankenship, a glaciologist at the University of Texas at Austin and one of the study’s co-authors. Blankenship was not on the research vessel, but he and his colleagues helped the Australia-based researchers with understanding the contours of the seafloor so they could plan their field investigations into where warm and deep waters could penetrate.

What Would Happen if the Entire West Antarctic Ice Sheet Collapsed? -- Scientists in the U.S. have identified an ominous trend in the Southern Ocean—the creation of enormous icebergs as rifts develop in the shelf ice many miles inland. And although three vast icebergs have broken from the Pine Island glacier in West Antarctica and drifted north in this century alone, researchers have only just worked out what has been going on. Their first clue came from a telltale shadow in the south polar ice, caught by a NASA satellite and visible only while the sun was low in the sky, casting a long shadow. It was the first sign of a fracture 20 miles inland, in 2013. Two years later, the rift became complete and the 580 sq km iceberg drifted free of the shelf. "It's generally accepted that it's no longer a question of whether the West Antarctic Ice Sheet will melt—it's a question of when," said study leader Ian Howat, a glaciologist in the School of Earth Sciences at Ohio State University in the U.S. "This kind of rifting behavior provides another mechanism for rapid retreat of these glaciers , adding to the probability that we may see significant collapse of West Antarctica in our lifetimes." The scientists report in Geophysical Research Letters journal says that they discovered that although shelf ice could be expected to wear at the ocean edge, something else was happening in West Antarctica. The Pine Island glacier is grounded on continental bedrock below sea level, which means that warming ocean water could penetrate far inland beneath the shelf, without anyone being conscious of any change. The first evidence of something unusual was a valley—the one highlighted by shadows visible only at a particular time and captured by NASA imagery—in the ice, where it had thinned. The valley was the first outward sign that ice was melting far below the surface.

This Melting Glacier in Antarctica Could Raise Sea Levels By 11 Feet - The Earth’s climate, it seems, isn’t listening to the politicians that are insisting it’s not warming. The temperature continues to rise incrementally, and the globe’s large glaciers—giant vaults of stored water—continue to melt, releasing into the oceans. The global sea level, due to thermal expansion and glacial melting, continues to rise, building up a head of steam like a train just beginning its descent down a steep hill.Greenland’s hulking glacier and the Arctic Sea ice are now marked by their rapid melting. And the western Antarctic ice sheet has garnered a lot of attention recently, too. But while scientists were fretting over the western side of Antarctica, the eastern Antarctic ice sheet has been melting too. Australian researchers braved treacherous sea conditions to collect data on the melting Totten Ice Shelf there, which holds up a body of ice that would cause over 11 feet of sea level rise, if it melted. Their findings are published in the journal Science Advances. Scientists have concluded that ice shelves and glaciers in eastern Antarctica have been experiencing basal melt, where the bottom layer of a body of ice starts to melt away, but they’ve never directly observed how it’s happening and what the main drivers of melting are until now. In Antarctica, the ice sheets covering the continent are so large that they extend beyond the land’s edge. Picture a pool cover that’s only covering half of an in-ground pool. Part of it lays on the patio nearby, and the rest of it slopes downward onto the water’s surface where it floats. Where the glacier hits the water is a buttress of ice called a shelf, which keeps the land bound ice from draining into the sea. If the shelf melts then—well, you get the idea. Such is the Totten Ice Shelf.

Collapse of West Antarctic Ice Sheet Reveals Inadequacy of Current Climate Strategies - With president-elect Donald Trump and his army of climate deniers preparing to take office, it could be a hard battle to get the US to adhere to any sort of climate policy anytime soon. This is hard news because today's suggested but nowhere-implemented climate policy was already much less restrictive than the climate policy from the mid-1990s. In a world where we have emitted as much carbon dioxide since 1987 as was emitted in the previous 230 years, why has policy not become more stringent? This outdated emissions reductions policy has earned the title "legacy," not because it is worthy of recognition, or something we want to pass on to future generations, but because it is like "legacy software," in that "it is difficult to replace because of its wide usage." The climate policy strategy that we are attempting to implement in the face of Trump's intransigence is conceptually similar to what we were supposed to adopt with the Kyoto Protocol back in the 1990s. That is, it involves a reduction of annual greenhouse gas emissions. The two relevant actions that we are now struggling to implement are the Clean Power Plan (CPP) and Obama's Paris Climate Conference commitment. The CPP is still not implemented and has been sent back to District Court for further litigation. On paper, its emissions reductions are a fraction more restrictive than the initial Kyoto targets but overall, the CPP is significantly less restrictive than Kyoto because Kyoto targets were supposed to have been achieved in 2012. The CPP pushed the deadline back 18 years to 2030. Obama's Paris commitment in 2015 is even further behind. Kyoto Phase 2 targets were 80 percent below 1990 by 2020. Obama's are 80 percent below 2005 by 2050. This is 30 years behind and 30 percent less stringent. Kyoto, of course, was never ratified in the United States and we have the dubious honor to be the only country in the world to not do so.

ExxonMobil CEO Relieved It’s Finally Too Late To Do Anything About Climate Change — Saying the multinational oil and gas conglomerate had “really dodged a bullet,” ExxonMobil CEO Rex Tillerson told reporters Wednesday how relieved he was now that it was finally too late to do anything about climate change. The 64-year-old petroleum executive, who acknowledged that throughout his career he had feared the public might take action to curb rising temperatures by imposing emissions restrictions or mandating a switch to alternative energy, said he was just happy that the window for avoiding the planet’s environmental destruction had closed, and that the entire industry was now free to carry on as usual. “I was really worried for a while there that some kind of law would be passed to stop us from releasing all those hydrocarbons into the atmosphere, but I guess not,” said Tillerson, describing how he felt as if a tremendous weight had been lifted from his shoulders now that catastrophic climate change was an inescapable certainty. “Seriously, it’s a huge load off. There were a number of real tense years after the recycling movement picked up momentum when we thought people might all turn away from fossil fuels next. But it’s just so reassuring to know that we passed the point where it’s no longer possible to stop global warming through environmental regulation or green energy or anything like that.” “Now I can finally just relax,” he continued. “This really makes things so much easier.”

Arctic ice melt ‘already affecting weather patterns where you live right now’ - The dramatic melting of Arctic ice is already driving extreme weather that affects hundreds of millions of people across North America, Europe and Asia, leading climate scientists have told the Guardian. Severe “snowmageddon” winters are now strongly linked to soaring polar temperatures, say researchers, with deadly summer heatwaves and torrential floods also probably linked. The scientists now fear the Arctic meltdown has kickstarted abrupt changes in the planet’s swirling atmosphere, bringing extreme weather in heavily populated areas to the boil. The northern ice cap has been shrinking since the 1970s, with global warming driving the loss of about three-quarters of its volume so far. But the recent heat in the Arctic has shocked scientists, with temperatures 33C above average in parts of the Russian Arctic and 20C higher in some other places. In November, ice levels hit a record low, and we are now in “uncharted territory”, said Prof Jennifer Francis, an Arctic climate expert at Rutgers University in the US, “These rapid changes in the Arctic are affecting weather patterns where you live right now,” she said. “In the past you have had natural variations like El Niño, but they have never happened before in combination with this very warm Arctic, so it is a whole new ball game. “It is inconceivable that this ridiculously warm Arctic would not have an impact on weather patterns in the middle latitudes further south, where so many people live. “It’s safe to say [the hot Arctic] is going to have a big impact, but it’s hard to say exactly how big right now. But we are going to have a lot of very interesting weather – we’re not going to get around that one.”

Trump rejects climate change, but Mar-a-Lago could be lost to the sea - Donald Trump shelled out $409,759 for property taxes in 2016 on Mar-a-Lago, his oceanfront club above billionaire’s row in Palm Beach, Fla. Some of those tax dollars will go toward combating the ravages of climate change, a phenomenon the president-elect has dismissed as a hoax. That’s not stopping officials in Palm Beach from preparing to deal with its effects. This year, the town overhauled 12 pumping stations to push storm runoff up a huge pipe to the Intracoastal Waterway under a 20-year, $120 million infrastructure plan to deal with increased rainfall and street flooding, among other issues. Palm Beach’s system can now suck up almost 1 million gallons of runoff a minute. “I just deal with the reality that sea levels are rising,” says Palm Beach Town Manager Thomas Bradford. “I don’t want to rile people up about it.” A bike path along the Intracoastal Waterway floods when the full moon and high seas cause so-called king tides, which have grown more intense. Brackish water bubbles out of the ground, forced up by pressure on the water table from rising sea levels. According to Palm Beach County’s online climate-change mapping tool, the back quarter or so of Mar-a-Lago’s verdant, palm-tree-lined grounds would flood if sea levels rise two to three feet. The town recently changed the construction code to require higher seawalls around homes built on the water because of the threat of higher seas. Trump’s yearly property taxes for Mar-a-Lago resort in Palm Beach: $410k

The maddening, uncertain reality of sea-level rise - By far one of the most important impacts of global warming in the decades ahead will be sea-level rise. As the Earth heats up and ice sheets in Greenland and Antarctica melt, ocean levels will creep upward, flooding coastal cities and forcing large-scale relocations around the world.But there’s a troubling asterisk here: We still don’t know exactly how high oceans are likely to rise this century. Studies have suggested it could be anywhere from 2 to 6 feet, on average — with newer evidence leaning toward the higher end, depending on emissions and how quickly parts of West Antarctica’s massive ice sheet disintegrate. Worse, climate scientists probably won’t be able to pin down an exact number anytime soon, because getting a handle on ice-sheet dynamics is inherently tricky. That’s not reason for complacency, though. It actually makes preparation more urgent and difficult, because coastal cities will have to start mounting defenses in the face of considerable uncertainty. (This map, for instance, shows how different levels of sea-level rise could put different parts of New York City underwater.)That means, as climate scientists Michael Oppenheimer and Richard Alley explain in a new paper in Science, that coastal areas will have to learn to master the art of f lexibility — developing sea walls and other defenses that can evolve over time — and be ready for a wide array of plausible outcomes. Meanwhile, scientists themselves need to get much better at conveying the “deep uncertainties” around ice sheets and sea levels.

Study: Climate regs could cost $4.5T - Climate regulations could cost the average American more than $10,000 by 2050, according a new study by the business-friendly American Action Forum (AAF). If future presidents follow suit, the Obama administration’s climate agenda could cost the economy more than $1 trillion over the next three decades, the study found. But that figure pales in comparison to the $4.5 trillion cost of implementing the more aggressive plan by the Democratic Party to reduce greenhouse gases by 80 percent over that period. Under the Democratic plan, each American would lose about $10,300 per person.“A regulatory approach to deep decarbonization is expensive,” wrote Sam Batkins, the AAF’s director of regulatory policy and author of the study.“Regulatory costs must be borne by some entity, and usually it’s the consumer in the form of higher prices.“Consumers could expect to pay more for energy, household goods, and a host of other products and services,” he added. “The cost of using a car would rise by over $300 per year by 2050.”

Global Warming Law Would Cost Average Household $13,703 - Daily Caller - According to The Global Warming Policy Foundation (GWPF) report, The U.K government Climate Change Policy passed in 2008 may charge every British household an average of $13,703 in the year 2030. Reports say, in 2014 alone, the total Climate Change Act average charges, including levies, taxes, and subsidies is $415 for every British household. This amount may increase to $791 annually by 2020 and $1,110 each year by 2030. While the overall cost of the policy will triple the annual British National Health Service (NHS) budget. In addition to GWPF’s report published by a Conservative Member of Parliament for Hitchin and Harpenden, Peter Lilley says, “that the government only considered about one-third of the Act’s total costs while simultaneously overestimating potential savings from energy efficiency. The MP published the report after consulting 27 academics and scientists. According to The Global Warming Policy Foundation (GWPF) report, The U.K government Climate Change Policy passed in 2008 may charge every British household an average of $13,703 in the year 2030. Reports say, in 2014 alone, the total Climate Change Act average charges, including levies, taxes, and subsidies is $415 for every British household. This amount may increase to $791 annually by 2020 and $1,110 each year by 2030. While the overall cost of the policy will triple the annual British National Health Service (NHS) budget.

The climate trials of the 21st century have begun --We now have underway the first climate trials (or various stages of them) of the 21st century. The overall question in these trials is actually straightforward: Do governments and corporations have an obligation to protect the habitability of the Earth's climate for human populations?Let's start with government. The first trial (in the United States) was not actually that recent. In 1999 a group of environmental organizations petitioned the U.S. Environmental Protection Agency (EPA) to regulate greenhouse gases. In 2003 the EPA denied the petition. Several states then joined a legal appeal which reached the U.S. Supreme Court. The court decided in 2007 that, in fact, the EPA did have the authority and the obligation to consider seriously how to regulate greenhouse gases.The agency then offered a regulation plan which was challenged in court. In 2014 the Supreme Court found the EPA plan acceptable with a few minor tweaks. This kind of legal battle is really a plain vanilla regulatory fight about what a particular government agency can and should do under existing laws. But a more sweeping type of legal battle is now unfolding, one that invokes a much broader obligation of the government to make the climate safe for future generations.In Washington state a group of young people between the ages of 12 and 16 sued the state to force it to implement a greenhouse gas emissions reduction plan. The state has since come up with a plan that the attorneys for the children say is inadequate. They are in court once again.Washington isn't the only state feeling the judicial heat. A group called Our Children's Trust is pursuing legal action in several states (including the case cited above) and in federal court. The federal case is proceeding to trial after the government failed to get it dismissed. The aim of the federal plaintiffs is to seek broader protection in policies across the government, not in just one agency. Some legal experts give the federal case little chance of succeeding even if the plaintiffs win at trial. Appellate courts and the Supreme Court are unlikely to buy the argument that there is a general obligation on the part of the government to regulate greenhouse gases that is judicially enforceable outside of specific legislation. But, there will be an airing of scientific evidence during the trial and an attempt to expand existing legal doctrines to cover the unique challenges posed by climate change. This case is the first of its kind at the federal level related to climate under the so-called public trust doctrine.

Court Rules Climate Scientist Can Pursue Defamation Claims Against Critics - Leading climate scientist Michael Mann will see his defamation lawsuit against writers who called him the "Jerry Sandusky of climate science," amongst other accusations, move forward thanks to an appeals court ruling on Thursday. Mann is the director of the Earth System Science Center at Pennsylvania State University and is well-known for his iconic "hockey stick" graph of modern global temperature rise. He is routinely criticized and even threatened for his research linking climate change to human activities such as the burning of fossil fuels. "I've faced hostile investigations by politicians, demands for me to be fired from my job, threats against my life and even threats against my family," Mann wrote in the Washington Post . The case involves articles written by Rand Simberg for the think tank Competitive Enterprise Institute and Mark Steyn for the conservative publication National Review . Both entities have been critical or reject the science behind climate change and the writers have accused Mann of academic fraud. On Thursday, a three-judge panel for the DC Court of Appeals upheld a lower court's refusal to dismiss the suit and unanimously ruled that a "reasonable jury" would have "sufficient evidence" that the authors and the entities they worked for published false and defamatory claims about Mann and his work "with actual malice." Simberg and Steyn argued that their comments were protected as free speech under the First Amendment, The Hill reported. But in the ruling, the court said that while statements made during a "no-holds-barred debate over global warming" are protected under the First Amendment, "if the statements assert or imply false facts that defame the individual, they do not find shelter under the First Amendment simply because they are embedded in a larger policy debate."

UK’s biggest energy supplier faces boycott calls over climate change denier links - Britain’s biggest energy company, Centrica, is facing calls for a boycott after it emerged a US subsidiary gave thousands of pounds to a think tank that promotes climate science denial – even though the company claims to be a “world leader” on action to address global warming. A list of donors to the Texas Public Policy Foundation (TPPF), which was leaked to the Texas Observer, shows Direct Energy gave US$20,000 in 2010. And Centrica, which owns British Gas, told environmental campaign group Greenpeace that it had continued to provide funding since then, although it did not provide further figures. As the biggest electricity and gas supplier in the UK, serving about 11 million homes, Centrica’s business involves producing a large share of the country’s greenhouse gases. However the company says it is internationally recognised as “a global leader for action and disclosure on climate change” and insists it believes “climate change is one of society’s greatest global challenges”. This view contrasts sharply with those of the TPPF, which has been praised by climate science denier Rick Perry – who will be US Energy Secretary under President Donald Trump – for opposing the “hysteria of global warming”. At the TPPF’s third annual energy and climate policy summit earlier this month, Senator Jim Inhofe, who once took a snowball into the Senate as evidence against global warming, was one of two keynote speakers.

To Hell with Neoliberal Environmentalism - I was poised to write a piece on the linkage between present-day veneration of duplicitous political elites and the crisis of national identity when I found the following op-ed in the Guardian: How to make a profit from defeating climate change. It is subtitled “Given the right information, investors will deliver the best climate solutions” and co-written by Michael Bloomberg and Mark Carney, two of the most powerful persons in the world today. The former is the sixth-richest man in the United States and former mayor of New York City, and the latter is the current Governor of the English Central Bank. So when we discuss this article, remember that this isn’t the work of rubes at the margins of mainstream discourse; these are the people that define the mainstream discourse and hence, whatever they say should be taken as being representative of the thought that predominates in elite circles. I have written about the impact of ‘incentivization’ of hitherto moral sentiments in “Marketworld”, my earlier post on Uber. One of the central tenets of neoliberal thinking is that traditional moral sentiments – altruism, honor, solidarity – are unreliable and duplicitous; they should be replaced by ‘incentives’ to ensure optimal outcomes for all involved. Politics and democracy are reduced to a policy marketplace, where you choose those leaders that offer the bundle of policies that most resemble your own preferences. The similarity of this construct to the job market is not incidental; it is by design. The gist of this article by Messrs Bloomberg and Carney, which I suggest you read in full, is to introduce “voluntary, consistent [climate-related] disclosures” as market-based climate solutions. These disclosures will provide information about “the likely future cost of doing business, of paying for emissions, and of changing processes to avoid both those charges and tighter regulation”. The end-goal is to create a “properly functioning market [that] will price in the risks associated with climate change and reward firms that mitigate them”. The rest of the article is standard neoliberal cant about the heroism of entrepreneurs and the infallibility of markets, which we can safely ignore. The idea is to price in the risk of climate change and the possible costs, regulatory or otherwise, associated with. If a business voluntarily (hahahaha) discloses how much of its profitability is dependent on fossil fuels or climate change regulation, investors will be able to take that information into account and adjust their capital accordingly. After all, companies have no reason to mitigate their carbon footprint unless it hits their bottom line. Now that markets can factor in the material costs of climate change, we are moving to a future where profit motives align with climate change concern: the best of both worlds. Aaaaannnndd… we have already lost.

Public climate information threatened under Trump - Google “climate change” and the top two hits are websites that are part of NASA’s online climate portal, followed by a Wikipedia entry and the U.S. Environmental Protection Agency’s climate website. Websites maintained by the federal government are among the first online stops for the general public — from students, local policymakers and everyone else — to learn about climate change. There is rising concern among scientists and climate communications experts that those websites may be among the first to be deleted, politicized or degraded with inaccurate climate information after President-elect Donald Trump takes office in January, all of which would impact the public’s understanding of the science and urgency of climate change. Trump is populating his cabinet with appointees who reject established climate science and have pledged to overturn nearly all of the government’s climate regulations and pull the U.S. out of the Paris climate pact. EPA administrator nominee Scott Pruitt has falsely said that scientists disagree about the human connection to global warming, and debate about it should be encouraged. Pruitt, currently Oklahoma’s attorney general, says on his official website that he is “a leading advocate against the EPA’s activist agenda.”

Should the Super-Rich Save Climate Research from Trump? -Judging from statements made by President-elect Donald Trump's transition team, and the growing list of nominees for key jobs in his administration, the future of environmental science and clean energy research is looking shaky. The question is, even if America’s climate-friendly billionaires can fill the gap, should they? Trump has his eyes on defanging the Environmental Protection Agency and scrapping the Clean Power Plan. It’s also been suggested that he might cut funding of NASA’s climate science research. Researchers have been backing up data amid fears that it might vanish. And if Rick Perry becomes the head of the Department of Energy, research into new energy solutions will not be led by concern for the climate. All of which leaves some scientists wondering who might help them monitor humanity’s impact on the planet. At the American Geophysical Union meeting in San Francisco on Thursday, Marcia McNutt, president of the National Academy of Sciences, said that private donors may foot the bill for funding climate science. According to Buzzfeed, McNutt says that she’s spoken with people who could raise billions of dollars to help the cause.The news follows the announcement earlier this week of the Breakthrough Energy Ventures fund, which commits $1 billion over the next 20 years to funding energy ideas considered to be too risky by regular venture capital firms. It’s bankrolled by over 20 billionaires, among them Amazon’s Jeff Bezos, Alibaba’s Jack Ma, and Virgin’s Richard Branson.The problem, of course, is that by offering to pay for climate science and energy research, billionaires may simply signal that private funding will suffice—a notion that Trump may be happy to buy into. That is not the case. The government plays a crucial role in funding basic research, and that must continue. McNutt seems to be thinking along the same lines. While she may be attempting to line up potential funding sources, her message to them is, apparently, “hold off.” She says that she doesn’t want anyone to give Trump and Congress the excuse to cut funding for climate science.’

EPA chief says Trump has limited room to scrap climate rules - The chief architect of President Barack Obama’s climate change policies has warned the incoming Trump administration that US law and the scientific evidence of global warming will constrain any attempt to overturn her work. With the outlook for global climate action uncertain after the US election, Gina McCarthy, the top US environmental regulator, told the Financial Times that climate change sceptics led by Donald Trump would have limited room for manoeuvre. “It’s going to be a very high burden of proof for them,” said Ms McCarthy, the head of the Environmental Protection Agency, outlining why US law would ensure that Mr Trump could not easily abolish climate change regulations. Mr Trump’s presidential victory delivered a shock to global efforts to tackle climate change. He vowed in his campaign to withdraw from the 2015 Paris climate pact and to end US funding for UN climate programmes. The president-elect has embraced the Republican party’s doubts on global warming, tweeting in 2012 that it was a hoax invented by China. This month he said it was “a big scam for a lot of people to make a lot of money”, but on the scientific evidence declared: “I’m still open-minded. Nobody really knows.” Ms McCarthy said: “I frankly am disappointed that we’re still talking about the science of climate, because that really has been long settled.”

Researchers must convince Trump that science matters, interior secretary says - Scientists will need to speak up about their research and the importance of scientific integrity — or risk not being heard by the incoming administration, said US Interior Secretary Sally Jewell at the meeting of the American Geophysical Union today. Her talk was a carefully worded call to arms for scientists to become part of the political process. “If you’re not at the table, you’re on the menu,” she said. Part of that will require learning how to talk about science not only in the kind of language a layperson can understand, but also in the language of dollars and cents. Communicating science’s value will be critical in order to appeal to an increasingly business-oriented administration. “When you have a President-elect of the United States that’s in the real estate development business, your science matters,” she said. “Nobody wants to build a building in harm’s way if they’ve got good data that tells them where they can build it out of harm’s way.” Despite uncertainty, I remain optimistic about the future. It's hard to put the genie back in bottle on #ActOnClimate progress. #AGU16pic.twitter.com/6Uv8Ygzvd3 — Sally Jewell (@SecretaryJewell) December 14, 2016 Jewell currently occupies the post that President-elect Trump just tapped Montana Republican Ryan Zinke to fill. As interior secretary, she oversees 500 million acres of public lands as well as mining, drilling, and energy development. Before President Obama appointed her, she was the CEO of the outdoor outfitter R.E.I. Earlier today, she spoke to a mixed room of scientists and media attending the annual meeting of the American Geophysical Union. The scientists in the audience studied a range of subjects including Earth sciences, planetary sciences, and climate change. There’s a lot of uncertainty about what the future holds for science and scientists, Jewell said. And she declined to speculate about what the next administration will do. “I think it’s fair to say we’ve all seen a lot of mixed signals,” she said.

Jeb Bush on Scott Pruitt's EPA -- From an editorial by Jeb Bush on CNN.com: Our country has been held back over the past eight years because the appropriate balance between federal and state powers has become totally skewed. Individual liberty and our constitutional order have been threatened. People's aspirations have been capped by a federal government that overextended its reach, and in no place has this been more apparent than at the EPA. The EPA has become a one-agency job killer, putting working people out of a job and increasing costs for everyone. The far left has tried to distort Pruitt's views in a lame attempt to make him into an anti-science boogeyman. The Scott Pruitt I know is far from it. Unlike liberals who want to shut down any rational debate about climate change, Pruitt has acknowledged human impact on the climate and supports a robust discussion about its effects and what the government should and shouldn't do to address it. In a 2013 speech, Pruitt demonstrated that he understood the proper role of the EPA, completely repudiating Democrats' ludicrous claims about how he would lead the agency: "May I say this to you and please hear my heart on this. ... It's not good for us to say that the EPA doesn't have any role. Because just think about it, you have a power plant in Arkansas that's burning coal irresponsibly or inconsistent with the statue, and it comes over to Oklahoma and Texas. So there is a role for the EPA, it's just that they assert themselves in ways that are above that role." At the EPA, Pruitt will balance the importance of protecting our environment -- ensuring clean air and water and being good stewards of our natural resources -- with maximizing the ability of free people to innovate and create without interference from the federal government.

World Energy Hits a Turning Point: Solar That’s Cheaper Than Wind - A transformation is happening in global energy markets that’s worth noting as 2016 comes to an end: Solar power, for the first time, is becoming the cheapest form of new electricity. This has happened in isolated projects in the past: an especially competitive auction in the Middle East, for example, resulting in record-cheap solar costs. But now unsubsidized solar is beginning to outcompete coal and natural gas on a larger scale, and notably, new solar projects in emerging markets are costing less to build than wind projects, according to fresh data from Bloomberg New Energy Finance. The chart below shows the average cost of new wind and solar from 58 emerging-market economies, including China, India, and Brazil. While solar was bound to fall below wind eventually, given its steeper price declines, few predicted it would happen this soon. 1 “Solar investment has gone from nothing—literally nothing—like five years ago to quite a lot,” said Ethan Zindler, head of U.S. policy analysis at BNEF. “A huge part of this story is China, which has been rapidly deploying solar” and helping other countries finance their own projects. “Renewables are robustly entering the era of undercutting” fossil fuel prices, BNEF chairman Michael Liebreich said in a note to clients this week.Those are new contracts, but plenty of projects are reaching completion this year, too. When all the 2016 completions are tallied in coming months, it’s likely that the total amount of solar photovoltaics added globally will exceed that of wind for the first time. The latest BNEF projections call for 70 gigawatts of newly installed solar in 2016 compared with 59 gigawatts of wind. The overall shift to clean energy can be more expensive in wealthier nations, where electricity demand is flat or falling and new solar must compete with existing billion-dollar coal and gas plants. But in countries that are adding new electricity capacity as quickly as possible, “renewable energy will beat any other technology in most of the world without subsidies,” said Liebreich.

Solar is top source of new capacity on the US grid in 2016 - The US electric grid continued to transform in 2016. No new coal plants were added, and solar became the top new source of generating capacity. Combined with wind, a small bit of hydro, and the first nuclear plant added to the grid in decades, sources that generate power without carbon emissions accounted for two-thirds of the new capacity added in 2016.These numbers come from the US Energy Information Administration, which asked utilities about what sources they expected to have online at the end of the year. These numbers typically show a burst of activity in December, as projects are raced to completion to take advantage of the tax benefits of reaching operational status in the current year.Overall, the EIA recorded 26 GW of new capacity added to the grid in 2016. This includes a small amount (0.3GW) of new hydropower and a smattering of projects collected under "other" that produce a similar magnitude. Notably absent from the list is coal. Also absent is distributed solar, meaning panels installed on homes and other small-scale projects. Distributed solar accounted for about 2GW of new capacity in 2015, and the EIA notes that the incentives for these projects haven't changed considerably in 2016.Even without that 2GW, solar comes out on top, with 9.5GW of new additions this year. At 8GW, natural gas comes in second place on the EIA's list, followed by wind at 6.8GW. Thanks to the opening of a new reactor at Watts Bar in Tennessee, nuclear also joins the list for the first time in years, adding 1.1GW of capacity. Combined, wind, nuclear, hydro, and solar account for 68 percent of the new additions, making 2016 a low-carbon year for the US grid. Assuming distributed solar this year is similar to its 2015 levels, the percentage of new non-fossil generation goes up above 70. It's important to note that no energy source runs at full capacity. Utilization typically ranges from the low 30 percents for solar up to about 90 percent for nuclear; for gas, utilization typically depends on how often the local grid needs a rapid response to demand. So, predicting precisely what these installations will mean for future generation is difficult, other than the fact that all of these sources produce less carbon per unit of electricity than coal.

How clean is solar power? The Economist has a post on research from the Utrecht University into the energy investment required for solar panels and the amount of carbon emissions involved - How clean is solar power? You can see how far solar PV has come in terms of energy return on investment when the numbers being quoted for new panels are around 15 now (taking less than 2 years to return the initial energy investment). Wilfried van Sark, of Utrecht University in the Netherlands, and his colleagues have ... calculated the energy required to make all of the solar panels installed around the world between 1975 and 2015, and the carbon-dioxide emissions associated with producing that energy. They also looked at the energy these panels have produced since their installation and the corresponding amount of carbon dioxide they have prevented from being spewed into the atmosphere. Others have done life-cycle assessments for solar power in the past. None, though, has accounted for the fact that the process of making the panels has become more efficient over the course of time. Dr Van Sark’s study factors this in. [The team] found that solar panels made today are responsible, on average, for around 20 grams of carbon dioxide per kilowatt-hour of energy they produce over their lifetime (estimated as 30 years, regardless of when a panel was manufactured). That is down from 400-500 grams in 1975. Likewise, the amount of time needed for a solar panel to produce as much energy as was involved in its creation has fallen from about 20 years to two years or less. As more panels are made, the manufacturing process becomes more efficient. The team found that for every doubling of the world’s solar capacity, the energy required to make a panel fell by around 12% and associated carbon-dioxide emissions by 17-24%.

Norway's Biggest Oil Company to Build Huge Offshore Wind Farm Off Coast of New York -- If everything goes to plan, New York City and Long Island will be harnessing the Atlantic Ocean's strong and dependable winds as a source of renewable energy . Norway's biggest oil company will be developing an offshore wind farm outside of New York. Statoil submitted the winning bid of $42.5 million to the U.S. Department of the Interior's Bureau of Ocean Energy Management last Friday to lease nearly 80,000 acres of federal waters roughly 14 miles off the coast of Long Island, the Huffington Post reported. The company estimates that the leased area could host a 1,000-megawatt offshore wind farm, with the first phase of development expected to begin with 400 to 600 megawatts. The first plan of action is to survey seabed conditions which can be as deep as 131 feet, grid connection options and wind resources at the site. "We now look forward to working with New York's state agencies and contribute to New York meeting its future energy needs by applying our offshore experience and engineering expertise," Irene Rummelhoff, Statoil's executive vice president for Statoil's renewable energy branch, New Energy Solutions, said in a statement . New York state aims to generate 50 percent of its electricity needs from renewable resources by 2030 and is betting big on offshore wind to help meet that goal. The Long Island Power Authority, with the support of New York Gov. Andrew Cuomo, is slated to approve a contract for a 90-megawatt offshore wind project 30 miles northeast of Montauk. "The U.S. is a key emerging market for offshore wind—both bottom-fixed and floating—with significant potential along both the east and west coasts," Statoil's Rummelhoff said.

How Carbon Emissions Explain Trump’s Win -- Trump’s polarizing appeal has deepened the existing geographic and demographic fault lines in American politics into a chasm so imposing it could mark the border between two countries. On one side, Hillary Clinton routed Trump in the racially and culturally diverse metropolitan centers that are helping forge a globalized, information-based, and low-carbon economy. On the other, Trump posted crushing margins in the places that feel eclipsed, or threatened, by all of those trends. The latest evidence of this widening divide comes from Trump’s repeated selection of oil-industry allies for key Cabinet positions: Exxon Mobil CEO Rex Tillerson for secretary of state, former Texas Governor Rick Perry for secretary of energy, and Oklahoma Attorney General Scott Pruitt as the Environmental Protection Agency administrator. Tillerson and Perry have both displayed some nuance in their approach to energy. But, overall, with those choices, Trump has indelibly endorsed the fear that reducing carbon emissions to combat the destabilizing threat of global climate change will undermine economic growth. Experience simply doesn’t justify that fear. As Mark Muro, policy director at the Brookings Institution’s Metropolitan Policy Program, calculated in an important recent analysis, since 2000 the United States increased its economic output by 30 percent while reducing carbon emissions by 10 percent. Over that period, he reported, fully 33 states grew their economies while reducing their emissions. Comparing the latest federal figures on states’ per capita carbon emissions with the 2016 election results produces a clear pattern. Trump carried all of the 22 states with the most per capita carbon emissions, except for New Mexico, and 27 of the top 32 in all. The Democratic nominee won 15 of the 18 states with the lowest per capita emissions—with the exception of Florida, North Carolina, and Idaho.

Donald Trump sends mixed signals on ethanol mandate -- After campaigning as a strong supporter of the use of ethanol and other biofuels in the nation’s gasoline supply, President-elect Donald Trump has chosen a forceful adversary of those federal requirements to implement them. Mr. Trump’s pick to run the Environmental Protection Agency, Oklahoma Attorney General Scott Pruitt, has called the ethanol mandate “unworkable” and filed a legal brief in 2013 backing a lawsuit challenging it. Mr. Trump during his transition also has sought advice from other critics of the program, many of whom stand to gain if it is changed or scrapped altogether. This has set off high-stakes jockeying across the oil, refining and agriculture industries about what will become of the mandate, which requires refineries to blend increasingly large amounts of biofuels—mostly corn-based ethanol—into gasoline. During the GOP primary, Mr. Trump emphasized his support for the mandate in Iowa—the nation’s biggest corn-producing state and home to the first nominating contest—in contrast with his Republican rivals who were mostly critical of it. “I am there with you 100%,” Mr. Trump told hundreds of Iowans whose livelihoods depend on the ethanol industry at a summit in January. “You’re going to get a really fair shake from me.” Since then, however, critics of the ethanol mandate have had Mr. Trump’s ear. Billionaire investor Carl Icahn , the majority owner of a small refinery operator facing hundreds of millions of dollars in costs to comply with the policy, was an early supporter of Mr. Trump’s and helped select Mr. Pruitt as his EPA chief. Most major oil companies, represented by the American Petroleum Institute, want Congress to scrap the mandate altogether. Some smaller refineries are calling on the agency to ease the rules in a narrower way. Biofuel companies, and farmers who grow corn for ethanol, fear that even a small change could pave the way for wholesale repeal.

Trump’s cabinet could change the face of U.S. energy policy -- President-elect Donald Trump’s nominees to lead energy and climate-related agencies hold views that could not be more different from the Obama administration. Here’s a guide to the things Trump’s cabinet picks have said on issues from natural gas fracking to wind energy to climate change science. Scott Pruitt, EPA: wrote that the evidence linking human activity to climate change was “far from settled.” Ryan Zinke, Interior: “It’s not a hoax, but it’s not proven science either. But you don’t dismantle America’s power and energy on a maybe.” Rex Tillerson, State: Since Tillerson took over the world’s leading energy company in 2006, Exxon Mobil’s political action committee has donated more than $7 million to Republican candidates, many of them outspoken climate change skeptics. Rich Perry, Energy: While Perry’s energy record is complex, his position on climate change is unambiguous. Perry — who ran for president in 2012 and again in 2016 — has consistently questioned the existence of climate change. At a 2011 event in New Hampshire, Perry said the climate has been in flux “ever since the earth was formed. There are a substantial number of scientists who have manipulated data so that they will have dollars rolling into their projects,” Perry said. Other examples of Perry’s climate skepticism abound.

What Exxon’s 2017 energy outlook tells us about Rex Tillerson -- Exxon Mobil published its 2017 energy outlook this week. It didn’t get a lot of attention. All the oil majors churn out these reports each year. They are not business plans, but they might as well be. Companies invest on the basis of the future they expect to see. Since Donald Trump has chosen Rex Tillerson, CEO of Exxon, as US secretary of state, it has a deeper significance. This is how America’s next chief diplomat understands the world.It is a vision that will smash the “safe” 2C limit 195 nations in Paris last year agreed to place on global warming. Tillerson may have endorsed climate action, unlike the rest of Trump’s cabinet, but he expects the Paris Agreement to fail. Exxon foresees global energy demand will rise 25% by 2040, even with a doubling of the rate of energy efficiency improvement. Oil and gas will supply nearly 60% of that demand. Conveniently, that’s what it’s flogging. Under this scenario, emissions peak in 2030 then start to decline. For comparison the International Energy Agency (IEA) 450 scenario, which gives a 50% chance of staying within 2C, sees energy-related emissions already falling by 2020. The moral argument underpinning Exxon’s analysis is that energy poverty kills. Developing countries have a right and an opportunity to expand access to energy. So far, so reasonable. What is missing is a sense of how unfettered climate change will hurt those same people toiling in the dark. Not to mention the air pollution, economic volatility and geopolitical risks that come with relying on fossil fuels.

If You Want To See How Donald Trump Will Destroy the Environment, Read this Legislative Roadmap -- If you’ve been wondering which environmental protections the incoming administration will target and how exactly they’ll try to undo them, take a look at the Competitive Enterprise Institute’s legislative agenda, “Free to Prosper.” Just a few months ago, this radical plan to dismantle environmental safeguards would have been dismissed as the wacky wish list of a conservative fringe group. But with Donald Trump headed to the White House and Myron Ebell, CEI’s director, overseeing the transition of the Environmental Protection Agency, the report, which was released last week, is a chilling preview of the attacks on environmental and health regulations that are likely to come — and a must-read for anyone trying to avert them. Beyond laying out specific paths to destruction, CEI’s legislative roadmap helps explain the group’s twisted logic for attacking environmental laws in the first place, something that may be lost on the vast majority of Americans, who want clean air and water, accept the reality of climate change, and are not steeped in anti-governmental legal theory.As CEI sees it, efforts to address the affects of pollution from fossil fuels on our climate are really a “war on affordable energy.” Bizarrely, the report uses a decline in global death rates due to extreme weather since the 1920s to justify the continued burning of oil and coal and its claim that carbon-based fuels “increase life expectancy.” While fossil fuels have unquestionably kept many people warm over the past century, alternative energy sources can also provide plenty of heat — and have the additional appeal of reducing the likelihood of extreme weather events. Most disingenuously, CEI presents its efforts to do away with climate protections as stemming from a concern for the poor, since “energy costs already impose real burdens on low-income households.” In truth, the poor are disproportionately affected by climate change. And, of course, huge energy and chemical companies are the ones who stand to benefit most from the assault on climate and other environmental protections suggested in the report. Not coincidentally, many of these same powerful interests, including Exxon, Dow, Texaco, the American Petroleum Institute, and the Koch Brothers have funded CEI.

Donald Trump's 16 Obsessive Letters To 'Mad Alex' Salmond About Wind Turbine 'Monsters' In Scotland | The Huffington Post: Donald Trump spent years attempting to persuade the Scottish Government to halt plans to build wind farms off the coast of the north of the country. The technology, the business tycoon argued, would have a detrimental affect on Scotland’s landscape - and more specifically the view from his Aberdeenshire golf course, Trump International Golf Links.Judging by a series of letters sent by Trump to the Scottish government, revealed in full following a Freedom of Information request by The Huffington Post UK, it’s no surprise the US President-elect is struggling to let go. As The Sunday Express revealed, the Republican remains fascinated with the country of his mother’s birth and the battle against wind turbines.Trump spent time during his infamous Trump Tower meeting with Nigel Farage urging the ex-Ukip leader to continue to rail against the renewable energy source, raising concerns about the many conflicts of interest he faces ahead of assuming office. Earlier this year, Alex Salmond told The Huffington Post UK that while he was Scotland’s First Minister, Trump wrote a series of “green ink” letters to him - and most went in the bin. He said: “Most American presidents don’t send you ‘green ink’ letters, often capital letters. Usually couriered overnight with press articles attached to them, ‘READ THIS!’ Underlined, three times.

Republican senator: House GOP killed energy bill to go to a party - House GOP leaders stopped working on an energy reform package this month because they wanted to go to a fundraiser in New York, a Republican Senate chairwoman is charging. Sen. Lisa Murkowski (R-Alaska) told the Alaska Journal that Speaker Paul Ryan (R-Wis.) didn’t hold an end-of-session vote on a compromise energy bill because he and other Republicans had to catch a train to the fundraiser. “The Speaker said ‘We’ve run out of time’ because they wanted to get on the party train,” Murkowski told the newspaper in an interview published late Monday. A spokesperson for Ryan didn’t immediately return a request for comment on Murkowski’s charge. After passing a spending bill and a water reform package, the House adjourned on Dec. 8 for the holiday recess without bringing a compromise version of the energy bill to the floor. The National Republican Congressional Committee was scheduled to hold its annual “Bright Lights and Broadway” fundraiser in New York City that weekend. Although the timing lines up as Murkowski said, there were still policy differences that needed to be resolved before an energy bill could come to the floor. In a Dec. 7 statement, Murkowski said two issues were still on the table, blocking the bill’s path to a year-end vote. Negotiators were hung up on a centerpiece proposal in the Senate’s version of the energy reform bill: a measure to expand liquefied natural gas exports. Senators insisted a final package include that measure, but the House removed it during negotiations, Murkowski said then. Ryan’s office announced on Dec. 7 that “the conferees were not able to come to agreement on various outstanding issues in time for the House to consider a conference report.” The failure of the energy bill ended more than two years of work toward a measure to expand energy production and streamline federal rules. If Congress has approved the measure, it would have been the first energy reform bill in a decade.

Blockchain will underpin our future energy system - Blockchain today might be like the internet in 1993: even though most of us don't know what it is, a decade from now you will wonder how society ever functioned without it. Blockchain is the technology behind the digital currency bitcoin. It is a kind of a distributed ledger that keeps track of things on millions of disparate computers, all coordinating with one another. The combination of smart grids, prosumers and blockchain may build a transparent platform for the cheap, clean flow of renewable energy from the grid to homes and from homes to the grid.In 1993, hardly anybody had heard the word internet and the iPhone was introduced as late as 2007. Think of the explosion and disruption that happened over the following decade. Think of how our way of life was completely changed by this 'internet' thing. Imagine what it could mean if blockchain is the next internet.The future electricity distribution system will be made up of billions of endpoints interacting with each other -- microgrids, solar, smart appliances, sensors and energy management software. It will be important to create a secure system that can verify instantaneous, autonomous transactions across these nodes as market conditions change. Blockchain technology has the potential to make distributed grid management easier through "smart contracts". Smart contracts tell the system which transactions should be made at what time, following clearly defined rules for energy flows and storage to balance supply and demand. Blockchain technology could also have a direct impact on grid management and storage, and play a central role in the rise of so-called "virtual power plants" - energy-generating resources connected across a smart grid but that aren't necessarily concentrated in one central location. And, of course, blockchain could play an important role in the remuneration of the participants in these virtual power plants.

General Motors’ sustainability chief says Trump can’t stop the green energy boom - As Donald Trump mans his cabinet with climate deniers and skeptics, green activists have been putting together battle plans. General Motors’ sustainability director David Tulauskas has reassuring words for them: renewable energy has reached a tipping point where it is rapidly becoming cheaper and more reliable than carbon. So there’s nothing Trump can do to get the world’s third biggest automaker to go back in time to fossil fuels: “Four years, eight years of whoever’s the president of the United States really has no impact on our commitment to renewable energy,” he said, discussing GM’s promise to be 100% powered by renewables by 2050. Even if Trump’s fervently climate denialist EPA chief Scott Pruitt were to try to cut government subsidies for green energy, it couldn’t kill the market forces moving in favor of renewables. “We don’t need the old type of policy around incentives to support a nascent technology to sort of incubate it. We’re well beyond the incubation period. Renewable technology is here, it’s proven, it’s reliable, it’s affordable,” Tulauskas said. “Wind energy no longer necessarily needs credits…it’s some of the cheapest energy you can find anywhere in the world. So a Trump administration really has no impact at all.”

The Bingham Canyon pumped hydro project – by far the world’s largest, but still much too small. - Some of the larger-scale options (pumped hydro, CAES, FLES etc.) presently being considered for storing intermittent renewable energy rely on the existence of holes in the ground, often man-made ones, to make them work. In this post I take as a hypothetical example the world’s biggest man-made hole (the Bingham Canyon Copper Mine, Utah, shown as viewed from space in the inset) and fill it with water from the Great Salt Lake 25km to the north to get an idea of how much untapped hydro storage potential Bingham and other holes like it might offer. I find that Bingham has the potential to store about 3TWh, which would make it by far the largest pumped hydro facility in the world. 3TWh of storage, however, is nowhere near enough to support an all-renewables world, and there just aren’t that many more big man-made holes like Bingham around. The three basic ingredients of a pumped hydro project are an upper reservoir, a lower reservoir and pipelines (penstocks) connecting the two. Bingham already has two of these ingredients – a large hole suitable for an upper reservoir and the Great Salt Lake, which I assume, optimistically, could be used as a lower reservoir. First we will look at the potential size of the upper reservoir. The Bingham Canyon deposit has been mined more or less continuously since 1906 and here’s the resulting hole: I can’t find a detailed estimate of the total volume of material excavated from Bingham, but a ball-park estimate using Google Earth indicates around 10 billion cubic meters of material weighing approximately 25 billion tonnes. This is over a thousand times the 6.7 million cu m of excavation contemplated by the Flat Land Energy Storage project discussed by Euan Mearns in his FLES post. Of more direct concern, however, is the capacity of the upper reservoir to hold water. As shown in Fig. 1 the limiting water elevation occurs where Bingham Canyon itself intersects the pit, at which point the elevation is about 1920m above sea level. Using 1900m as the limiting water surface elevation gives the reservoir shape shown in Fig. 4. We have a roughly circular reservoir with an average diameter of about 5,000m, a maximum depth of 500m and an average elevation of 1,650m. Treating this shape as an inverted cone yields a volume of 3.3 billion cubic meters, a thousand times as much as the amount stored in the disused Glenmuckloch pit discussed in Euan’s recent eponymous post.

Utility regulator wants nuclear energy to count as renewable -- An Arizona utility regulator has suggested that nuclear energy should count as a renewable power source, allowing it to compete with solar and wind. Arizona Corporation Commissioner Andy Tobin proposed the change in a letter that implies he never supported the Renewable Energy Standard the state passed in 2006, which didn’t include nuclear energy as a renewable source. That legislation requires utilities like the Arizona Public Service Co. to get 15 percent of their power from renewable sources by 2025. Currently, solar, wind and geothermal energy count toward that goal but nuclear does not. Arizona Corporation Commission chairman Doug Little proposed doubling that goal in August. He said that would put Arizona more in line with the goals of other western states. Arizona is home to the country’s most productive nuclear power plant, Palo Verde Generating station, which is about 50 miles west of Phoenix. It supplies about a quarter of the electricity for the state’s biggest power company. If that plant counted as renewable energy, it would reduce the amount of solar, wind and other resources needed to fulfill the 2025 goal. Tobin has proposed setting a “Clean Peak Standard” that would include traditional renewable sources as well as the amount of nuclear energy power plants produce when electricity demand is highest.

India plans nearly 60% of electricity capacity from non-fossil fuels by 2027 -- The Indian government has forecast that it will exceed the renewable energy targets set in Paris last year by nearly half and three years ahead of schedule. A draft 10-year energy blueprint published this week predicts that 57% of India’s total electricity capacity will come from non-fossil fuel sources by 2027. The Paris climate accord target was 40% by 2030.The forecast reflects an increase in private sector investment in Indian renewable energy projects over the past year, according to analysts. The draft national electricity plan also indicated that no new coal-fired power stations were likely to be required to meet Indian energy needs until at least 2027, raising further doubts over the viability of Indian mining investments overseas, such as the energy company Adani’s Carmichael mine in Queensland, the largest coalmine planned to be built in Australia. India’s energy minister, Piyush Goyal, has been appealing to wealthier nations to provide capital to invest in renewable energy projects to help the country reach and exceed the targets agreed in Paris in November 2015. Significant state investment has not been forthcoming, but Tim Buckley, a director at the Institute for Energy Economics and Financial Analysis, said India had made up the shortfall with an influx of capital from the domestic and overseas private sectors in the past 12 months. Japan’s Softbank has committed to invest $20bn (£16.2bn) in the Indian solar energy sector, in conjunction with Taiwanese company Foxconn and Indian business group Bharti Enterprises. In September the largely French state-owned energy company EDF announced it would invest $2bn in Indian renewable energy projects, citing the country’s enormous projected demand and “fantastic” potential of its wind and solar radiation.

India to halt building new coal plants in 2022 -- India needs no extra coal power stations until at least 2027, according to the government’s latest draft National Electricity Plan.The plan, released by the Central Electricity Authority (CEA) for public consultation, makes no room for further generation capacity beyond the 50GW coal fleet that is under construction.The plan covers two five-year periods beginning in 2017 and 2022. The first period allows for the completion of those plants already being built. But after that, the CEA is planning for zero new thermal power generation before 2027.“As coal based capacity of 50,025MW [50GW] is already under construction which is likely to yield benefits during 2017-22, this coal based capacity would fulfil the capacity requirement for the years 2022-27,” the plan said.At the same time, the report aims to add 100GW of solar and wind. These renewable energy additions would more than double India’s clean energy capacity. This would put India on course to far exceed its pledges to the Paris agreement, said Siddharth Singh, associate fellow at The Energy and Resources Institute (TERI) in New Delhi. Narendra Modi’s government has promised to get 40% of its electricity from non-fossil sources (renewable and nuclear) by 2030, with finance and technology sharing from wealthier countries. The CEA proposal would mean the non-fossil share would increase to 53% as early as 2027, up from 31% today, without relying on international support.

The World Is Burning More Coal Than Ever, says IEA --Global coal use may be slowing down due to global warming regulations, but the world is still using more coal than ever before, according to a report by an international energy agency. Politicians and environmentalists around the world heralded the ratification of the Paris climate agreement this year, but the United Nations (U.N.) treaty to cut greenhouse gas emissions hasn’t done much to squash demand for energy in developing countries. “The world is burning more coal than ever,” reads a new report by the International Energy Agency (IEA). “Now we are witnessing another halt, but, even so, if we consider coal consumption from a historical perspective, the world has never burned as much coal.” China is the main driver of global coal growth, and IEA expects coal use to keep growing until 2021 depending on what the Chinese decide. Environmentalists have tried to claim China is weaning itself off coal, but more recent reports indicate the communist country is mining more of it.

IEA: China’s new coal plants make ‘no economic sense’ - China already has enough coal-fired power stations, says the International Energy Agency (IEA) and there is “no real economic sense in building more”. The many new coal plants it is building are unnecessary, says the IEA’s medium term coal market report, published today, because Chinese coal demand has already peaked. These new plants are frequently cited by those trying to cast doubt on climate action. Global coal demand growth will slow to a crawl over the next five years, the report adds, as steep falls in rich nations are offset by a rise in India and southeast Asia. Carbon Brief has a summary. The story of coal is set to remain centered on China, the IEA says. By 2021, the country will still burn around half the global total, as it does now. This is why China is the focus of the IEA report. Below the surface, however, there are significant changes afoot. The IEA has now definitively accepted that Chinese coal demand peaked in 2013, a prospect it deemed almost unthinkable as recently as last November. Keisuke Sadamori, IEA director for energy markets and security, told a conference call for journalists: “It is clear that the golden decade of coal is over in China…We see the coal demand in China in structural and slow decline.”Despite reaching peak coal, however, China continues to invest in new plant. As of July this year, some 205 gigawatts (GW) of coal capacity was under construction, which would add to around 950GW already operating. The central government has set a cap of 1,100GW by 2020. Existing plants are operating less than half the time. Running hours keep falling and China has ambitious targets to expand nuclear and renewables, while power demand growth is weakening.

China Orders Shut Down Of 1,200 Factories After Smog "Red Alert" Declared In Beijing -- In addition to its now traditional credit-funded boom-bubble-bust cycle which rotates from asset to asset, and is then promptly recycled courtesy of the nearly $35 trillion in various financial system "assets", another staple of the "new" Chinese economy are smog alerts following every burst in economic strength driven by "old economy" manufacturing. That's what happened overnight, when following months of manufacturing expansion, China's pollution problem has again caught up, and as a result Beijing's city government ordered 1,200 factories near the Chinese capital, including a major oil refinery run by state oil giant Sinopec, to shut or cut output on Saturday after authorities issued the highest possible air pollution alert.At 4:20pm on Friday afternoon, China's environmental watchdog issued a five-day warning about choking smog spreading across the north and ordered factories to shut, recommended residents stay indoors and curbed traffic and construction work, as the main Chinese news agency tweeted “Smog invades Beijing,” while posting a timelapse as well. Another tweet from Xinhua showed the skies blackening on Friday. Such "red alerts" are issued when the air quality index (AQI), a measure of pollutants in the air, is forecast to break 200 for more than four days in succession, surpass 300 for more than two days or overshoot 500 for at least 24 hours. The Beijing Municipal Environmental Monitoring Centre showed an air quality reading of 297 by Saturday afternoon as haze started to envelop the capital, after an earlier reading of around 120. Levels in the 301-500 band are considered hazardous to health. Primary schools and nurseries will remain shut down until Wednesday, when the smog situation is supposed to end, according to Xinhua. Old and ‘dirty’ vehicles have been banned from the roads, while polluting industries were told to halt or minimize their work.

'Smog refugees' struggle to escape dangerous conditions in China - Winter has arrived in Beijing, and residents are struggling to escape the heavy smog that has settled on the city. This season the air pollution in China — stemming from power plants, factories, vehicles and other sources — has grown so bad during the past five days that it has put the safety of half a billion people at risk.Since polluted areas of north and central China were put under red alert from Friday until Wednesday by authorities, the haze has thickened, impacting everyday life and causing tens of thousands of "smog refugees" to evacuate. On Friday, Xinhua, an official news agency in China,reported that road construction has been halted, several schools have suspended classes and residents have been advised to remain indoors until conditions improve. According to The China Daily, the smog has been so disruptive to travel that severe flight cancellations and delays have taken place at local airports. Ctrip, China’s leading online travel agent, expected 150,000 people to flee the smog by traveling to places like Australia, Indonesia, Japan and the Maldives. Many people, such as Jiang Aoshuang, decided to take cover in smog-free regions of China, which became quickly packed. Aoshuang told the Global Times she evacuated with her husband and 10-year-old son to stay safe from the smog and protect their lungs. The family headed to Chongli, a ski resort about three hours north-west of the Beijing, where they discovered they weren't the only ones with the idea. "It really felt like a refugee camp,” Aoshuang said.

Nuclear energy a dirty word in South Africa - The nuclear reactors are still a plan on paper. But already the noxious debate over their future has made nuclear energy a dirty word in South Africa. To build or not to build – the stalemate over the proposed nuclear reactors to power the continent’s most advanced economy shows no sign of being resolved. The sharp divisions over a nuclear-powered future are now beginning to hurt South Africa’s nascent renewables industry. State power utility Eskom is dragging its feet on honoring government-brokered deals with private renewables companies. Its refusal to purchase 250 megawatts of power from wind and solar projects has left its Irish and Saudi Arabian suppliers fuming and in limbo. More than scuppering the deals, Eskom’s actions, critically, threaten to undermine the gains made by the country’s green energy program, which many have come to hail as the shining beacon of a renewables-based future . On the Fieldstone Africa Renewable Index or FARI, South Africa’s ranking has plummeted off the charts entirely, prompting concerns amongst investors over green energy’s future in the country. Its decline is ironic given the rainbow nation had topped the continent-wide list just four months ago.

Trump Says U.S. Nuclear Arsenal Must Be ‘Greatly’ Expanded - President-elect Donald Trump said Thursday the U.S. should increase its nuclear arsenal, an apparent reversal of a decades-long reduction of the nation’s atomic weaponry that came hours after Russian President Vladimir Putin reiterated calls for his country’s arsenal to be reinforced.“The United States must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses regarding nukes,” Trump said in a Twitter post.Putin downplayed the promised U.S. nuclear build-up at his annual press conference in Moscow on Friday, saying it was “no novelty” as it was in line with Trump’s campaign promises. On Thursday, Putin said Russia should also “enhance the combat capability of strategic nuclear forces, primarily by strengthening missile complexes that will be guaranteed to penetrate existing and future missile defense systems.” President Barack Obama has both reduced the U.S. nuclear arsenal, in an agreement early in his presidency with Russia, and sought to modernize it to replace thousands of bombs and missiles. His modernization plan -- which the Arms Control Association said would cost as much as $1 trillion over 30 years -- has come under criticism from proponents of denuclearization, who warn it may prompt a new arms race with Russia and China. “Unnecessary, unwise, and unaffordable,” Kelsey Davenport, the director of nonproliferation policy at the Arms Control Association, said of Trump’s comments in a post on Twitter.

This May Be Trump's Most Frightening and Dangerous Tweet Yet - With one tweet on Thursday, Donald Trump proved how dangerous and unstable his presidency could be.Out of the blue, Trump weighed in on one of America's most important national security issues: nuclear weapons. He tweeted: The United States must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses regarding nukes— Donald J. Trump (@realDonaldTrump) December 22, 2016 In just 118 characters, Trump seemed to be reversing decades of bipartisan policy aimed at stopping the spread of nuclear weapons around the world. For decades, the United States has worked with Russia, the other major nuclear power, to reduce both nations' nuclear arsenals. Richard Nixon, Jimmy Carter, Ronald Reagan, George H.W. Bush, Bill Clinton, George W. Bush, and Barack Obama have each negotiated treaties with Russia reducing nuclear stockpiles. Today, the United States and Russia each possess about 7,000 nuclear weapons, and there continue to be efforts to shrink these stockpiles. Yet with a single tweet, Trump suggested he would move in the opposite direction and expand the US nuclear arsenal. To what end? Trump did not follow up with any other thoughts. But many experts contend that nuclear weapons will not bring greater security to the United States, given that the greatest risks these days come from nonstate actors, crises in the Middle East, and cyberwarfare. Moreover, global efforts to prevent the proliferation of nuclear weapons—as enshrined in the international Non-Proliferation Treaty—are predicated on Washington and Moscow collaborating to downsize their nuclear arsenals. By declaring that the United States would enlarge its nuclear arms collection, Trump was undermining the attempts to stop the spread of these weapons throughout the world.

Nuke Experts to Trump: WTF? - Nuclear disarmament wonks are just as confused as the rest of the country when it comes to what exactly soon-to-be President Trump will do regarding America’s nuclear arsenal. “As with just about every Trump tweet, deciphering its actual meaning and intent can be a difficult task,” said Kingston Reif, of the Arms Control Association. This difficult task is upon us because on Thursday morning, Donald Trump tweeted this: The United States must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses regarding nukes What precisely he meant by that is unclear. “We’re treating him like he’s a normal human being whose utterances have symbolic meaning, but I don’t know,” said Jeffrey Lewis, Director of the East Asia Nonproliferation Program at the Center for Nonproliferation Studies. “I don’t know that this is any particular window into his policy or future.” Ordinarily, when future presidents speak about nuclear weapons, they do so very, very carefully. (Arms that have the potential to end the world have a way of inducing that kind of caution.) What’s more, because the Bombs are never supposed to be used, the signalling around them—how they’re positioned, how they’re tested, and how they’re discussed—becomes of paramount importance. So when, for example, President Barack Obama spoke in the first months of his administration about eventually ridding the world of nukes, such talk was taken very, very seriously. This time? Eh, maybe not so much.

A ‘mixed bag’ for clean energy as Midwest legislatures close out 2016 | Midwest Energy News Lawmakers in three Midwest legislatures closed out their 2016 lame-duck sessions with plans to both expand as well as slow clean energy development. The proposals in Ohio, Michigan and Illinois came under three Republican governors and, aside from Illinois, Republican-held legislatures.In each case, major utilities played significant roles — either prominently lobbying or behind the scenes — in getting policies adopted in their favor.In Ohio, this meant a concerted effort toward what critics say further weakens the state’s renewable energy and efficiency standards. On Dec. 8, lawmakers sent a bill to Gov. John Kasich that makes those standards voluntary for the next two years. Advocates and others have since called on Kasich to veto the plan.However, a different story played out in Illinois and Michigan, where clean energy was just part of broader statewide energy plans. In Illinois, Exelon pushed lawmakers for subsidies that would help keep open two uneconomic nuclear plants there at $2.4 billion over the next 10 years. Clean energy advocates supported the legislation, though, because it would update the state’s renewable energy standard in a way that will lead to more in-state solar and wind investment. In the past, Exelon had opposed such a measure out of fear that renewables would compete with its nuclear fleet. In Michigan, major utilities DTE Energy and Consumers Energy supported a two-bill package that Gov. Rick Snyder is expected to sign that expands renewable and efficiency standards. But for the past two years, the state’s partially deregulated electricity market was in the crosshairs, with major utilities leading a push that critics said would have ended the state’s electric choice market. In the end, Michigan’s bills received widespread support from both sides of the electric choice debate as well as from clean energy groups.

Bill would give $264 million tax break to Ohio oil and gas industry | The Columbus Dispatch: Ohio's oil and gas industry would get a windfall retroactive tax break, costing the state $215 million and local government $49 million, under a bill passed by the legislature. Senate Bill 235 has reached Gov. John Kasich's desk and is ready for his signature or veto, which is expected soon. Kasich's office declined comment. Kasich has attempted numerous times to increase taxes on shale fracking in Ohio, not cut them, arguing Ohio's severance tax rate is "a big fat joke" that lets out-of-state companies extract Ohio resources at little cost. GOP lawmakers have repeatedly blocked Kasich's proposed fracking tax hikes. The heavily amended bill, which was approved by the Ohio House and Senate during the recent lame duck session, includes a provision expanding the sales tax exemption for tangible personal property for the oil and gas industry, resulting in tax breaks estimated by the Ohio Department of Taxation at $264 million. In an unusual move, the General Assembly made the tax breaks retroactive to June 30, 2010, requiring the state to make sizable refunds. Taxation officials said tax breaks would amount to $211 million for oil and gas conduit pipe companies, $46 million for horizontal well operators, $7 million for injection well operations, and an indeterminate amount for other minerals producers. The bill was originally introduced more than a year ago as a bill to provide property tax breaks for developers, but underwent major changes on Dec. 8, when 20 amendments were added, including the tax breaks for the oil and gas industry. Lawmakers argued the oil and tax provision is a "clarification."

Ohio bill would allow boards of elections and Secretary of State to invalidate local initiative petitions like fracking and marijuana go against state law - Dayton Business Journal: Ohio communities that try to ban fracking with a citizen referendum would no longer be able to do so under legislation awaiting Gov. John Kasich’s signature, although it may not hold up to legal challenges. Inside a bill that started out addressing foreclosures and expanded to increasing coverage for people with autism is a small portion with big implications for some local communities. The amendment would allow boards of elections or the Ohio Secretary of State to invalidate local initiative petitions if either determines the petition is in conflict with state law or the Ohio Constitution.Some Ohio communities have brought ballot measures seeking to ban oil and gas drilling activity related to hydraulic fracturing, or fracking. Most notably Youngstown voters have since 2013 voted six times against a Community Bill of Rights that, if passed, would have banned the practice. During the Ohio Senate’s 26 to 5 acceptance of House Bill 463, Sen. Kevin Bacon, R-Minerva Park and chairman of the Senate Civil Justice Committee, cited Youngstown and a Newark measure that decriminalized small amounts of marijuana as reasons for the bill. Both local issues go against state rules. The Ohio Department of Natural Resources allows fracking and while Ohio has legalized medical marijuana, state law does not allow for any possession of marijuana. Newark officials have said they’ll still enforce the state's marijuana laws, despite their voters' intentions.

Northeast Ohio gas pipeline opponents vow to delay project - (AP) — Northeast Ohio residents who have tried to get a natural gas pipeline moved away from their communities are vowing to engage in delay tactics after a federal agency dismissed their suggested alternate routes. Opponents say they will not allow surveys or sell easements for the $2 billion NEXUS Gas Transmission project unless ordered to do so by a court."I will stand my ground, as everyone else is standing, until all of our resources and options are exhausted," said Medina County resident Jon Strong, who has helped lead the effort to reroute the pipeline the last 2 ½ years.The 255-mile-long line would carry gas from Appalachia across northern Ohio and into Michigan and Canada. Most of the high-pressured line would be in Ohio. Construction is slated to begin by March.Federal law gives companies wide latitude to build interstate pipelines, and NEXUS Gas officials say the Federal Energy Regulatory Commission's environmental impact study was a milestone move forward on the plans. Company spokesman Adam Parker said the alternate routes would take the pipeline away from its market areas and "does not accomplish the project's purpose and need."The company's last regulatory hurdle is winning a certificate of public convenience and necessity, which the company expects to get in early 2017. It also must complete surveys for the proposed route and pay land owners to bury the line on their properties. The most fervent opposition has been centered in Medina and Summit counties, where opponents say the pipeline will come too close to homes and businesses. Officials in Green in southern Summit County provided three alternative routes to the commission to move the pipeline away from their city.

Ohio environmental group challenges fracking in Wayne National Forest - An environmental group in Ohio plans to challenge the leasing of land in the state's only national forest to oil-and-gas drilling companies.The Ohio Environmental Council is asking President Barack Obama to stop the leases and says it will look at taking legal action.The U.S. Bureau of Land Management announced this past week that it has leased 759 acres of land in southern Ohio's Wayne National Forest to several fossil fuel development companies with future hydraulic fracturing in mind.Opponents contend that opening the land to fracking will threaten public health and local wildlife by polluting the air and water.But those leasing the land are still required to get a permit before any drilling can begin. Some national forests in other states already allow hydraulic fracturing.

Shale gas drilling permits increase in Ohio, Pa. -The Pennsylvania Department of Environmental Protection issued 179 horizontal drilling-related permits between Nov. 1 and Dec. 16, 2016. In western Pennsylvania, 42 permits were issued in Washington County, double the number of permits issued there in October and also September. Range Resources received 26 permits; EQT Production, 13; Antero Resources, two; and Rice Drilling received one. Range received three permits for the Sheller well site in West Finley Township; seven permits for new wells on the Munce unit in South Strabane Township; three permits for the Harmon Creek C well in Smith Township; three permits for the Harmon Creek B well in Hanover Township; three permits for the Harris wells in East Finley Township; and seven permits for drilling on the Robert Jones wells in Donegal Township. EQT Production received three permits for the Harbison well site in Nottingham Township; one permit for the Kevech well site in Fallowfield Township; three permits for the R. Smith wells in Carroll Township; two permits for the Haywood wells in Carroll Township; three permits for the Cogar wells in Amwell Township; and one for the Gallagher well in Amwell Township. The Ohio Department of Natural Resources granted 35 Utica/Point Pleasant Shale well drilling permits in November and another eight so far in December.Columbiana County was back in action with 11 permits, all issued to HilCorp Energy Company and for sites and legs on the Unkefer farm in Fairfield Township.The ODNR issued 14 permits in Monroe County in November. Antero Resources Corporation received six permits in Malaga Township, three for the Caddis units and three for the Streamer wells.Statoil USA Onshore Properties received two permits in Monroe County’s Salem Township for the Pfalzgraf wells, and EM Energy Ohio LLC received a permit for the Nick Nack well in Perry Township. Eclipse Resources also received two permits for the Moser wells in Salem Township, and the CNX Gas Company received a permit for drilling at the Francis and April Kinzy well site in Switzerland Township, and commenced drilling. In December, the ODNR issued eight drilling permits, as of Dec. 10, in the Utica shale. Three permits were issued in Monroe County to Antero Resources Corporation, all for sites in Seneca Township on the E.T. Rubel unit. All three wells are now producing. Another permit was issued in Monroe County to Statoil USA Onshore Properties, for the Pfalzgraf N U4H site in Salem Township.

A Wave Of New Fracking Is About To Hit Appalachia - Daily Caller State governments in Appalachia have issued 229 new permits for hydraulic fracturing, or fracking, since November, according to analysis by a trade publication. Pennsylvania’s government issued 179 permits since Nov. 1. Ohio issued 43 permits and West Virginia issued seven. This is almost double the average number of permits issued during a similar period, indicating that a fracking boom could soon occur in Appalachia. Ohio is producing 1,000 percent more oil and natural gas than it was in 2006 and its natural gas production grew 41 percent faster last year than it did in 2014, according to the U.S. Energy Information Administration (EIA). America produced 79 billion cubic feet per day of natural gas in 2015, breaking the previous record by 5 percent, according to the EIA. Most of that natural gas boom was concentrated in Pennsylvania, Ohio and West Virginia. Together, these states accounted for 35 percent of total American natural gas production — the rest of the country saw a modest decline. Much of this boom is due to a favorable regulatory and legal environment. Ohio Supreme Court’s struck down local fracking bans and concluded that local governments can’t hold referendums to amend charters to ban fracking.

Earthquake protections to be built into Pa. permits for fracking waste disposal wells - Pennsylvania environmental regulators are on the verge of approving two planned disposal wells for oil and gas waste fluids, on the condition that the operators take steps to limit the chances the wells will cause the kinds of earthquakes that have rocked other oil and gas producing regions. Department of Environmental Protection officials said they will soon issue long-delayed permits to Pennsylvania General Energy Co. and Seneca Resources Corp. for disposal wells in Grant Township, Indiana County, and Highland Township, Elk County. “The answer is going to be yes. It is just a question of what the conditions finally look like,” Scott Perry, DEP’s deputy secretary for oil and gas management, said at an advisory board meeting late last month. He said the agency expects to act on the applications “in the extremely near future.” A DEP spokesman could not say, specifically, when the permits will be issued. The applications for the wastewater wells have inspired an extraordinary degree of local opposition, especially for regions of the state that have a history of oil and gas development. Voters in Highland Township, population 492, adopted a new form of local government in November with a home rule charter that makes it illegal to deposit oil and gas waste in the township. Grant Township voters took the same step a year earlier. Both tiny communities (Grant’s population is about 740) decided to pursue the new charters despite having settled or lost earlier rounds of legal challenges brought by the oil and gas companies, which are suing the townships over their attempts to ban the wells. The permits — and all other injection well applications that DEP reviews in the near term — will carry three common conditions, as well as individualized requirements, DEP officials said. They will require the operators to perform seismic monitoring around the wells and to make the data picked up by the sensors publicly available — ideally in real time as an extension of the state’s established monitoring network. They will also force the operators to shut down wells that cause earthquakes of magnitude 2.0 or greater. Magnitude 2.0 and smaller seismic events are considered microearthquakes and are generally too subtle for humans to feel.

Anadarko, big Marcellus driller in state forests, to leave Pa. - Philly.com - Anadarko Petroleum Corp., has sold its Marcellus Shale operations in north-central Pennsylvania to a subsidiary of Alta Resources Development LLC for $1.24 billion, marking the exit of one of the larger shale gas developers in state forests. The company’s assets include drilling rights in the Loyalsock State Forest in Lycoming County, where Anadarko’s controversial extraction plans have been blocked by legal and administrative obstacles.Anadarko, which is based in The Woodlands, Texas, said its Marcellus Shale divestiture includes about 195,000 net acres, which produced about 470 million cubic feet of gas per day. The oil and gas company, which has international operations, has announced $5 billion in asset sales this year. The sale to Alta Resources represents the return of a company that explored the Marcellus in Susquehanna County from 2008 to 2010, before divesting its holdings. The late George P. Mitchell, who was widely regarded as the father of shale gas for his development of hydraulic fracturing techniques, was an early partner in Alta. The transaction is expected to close during the first quarter of 2017. Anadarko’s regional headquarters are in Williamsport.

Anadarko sells Marcellus shale natural gas assets: Anadarko Petroleum Corporation has agreed to sell its operated and non-operated upstream assets and operated midstream assets in the Marcellus Shale of north-central Pennsylvania to Alta Marcellus Development, LLC, a wholly owned subsidiary of Alta Resources Development, LLC, for approximately $1.24 billion. The midstream assets in the Marcellus owned by Western Gas Partners, Anadarko's sponsored master limited partnership, are excluded from the agreement. "With this transaction, we have announced or closed monetizations totaling well in excess of $5 billion in 2016, while principally focusing Anadarko's U.S. onshore activities on our world-class oil-levered assets in the Delaware and DJ basins," said Al Walker, Anadarko Chairman, President and CEO. "Our Marcellus team has done a superb job of maximizing the value of our position in this natural gas play, and we are grateful for their efforts and dedication." The Marcellus Shale divestiture includes approximately 195,000 net acres and, at the end of the third quarter of 2016, sales volumes from these properties totaled approximately 470 million cubic feet per day. The transaction is expected to close during the first quarter of 2017, subject to customary closing conditions and adjustments.

This Pipeline Would Cut Through America's Most Celebrated Hiking Trail - The proposed Mountain Valley Pipeline would carry natural gas 300 miles from northwest West Virginia to southern Virginia, crossing the Appalachian Trail and clearing trees on its way. Cutting through one of the most celebrated hiking trails in America , the proposed Mountain Valley Pipeline threatens wildlife habitat, recreational lands and the health of local Appalachia communities, while setting a terrible precedent of building energy infrastructure through our national forests. The construction of the pipeline sets a dangerous precedent, requiring the clearing of 125 foot wide corridor of forest lands protected by the Forest Service's Roadless Rule . Under the protection of the Roadless Rule, these unspoiled forest lands are protected from road building, logging, mining and other development. Starting 90 minutes south of Wheeling, West Virginia, the pipeline would wind south through the state before cutting east across Appalachian Trail and ending 30 minutes north of Danville, Virginia. Through Dec. 22 the Federal Energy Regulatory Commission (FERC) is seeking public input on the proposed plan to build the Mountain Valley Pipeline. We need to speak up and tell FERC Secretary Kimberly Bose to revise the current plan and more directly address the pipeline's lasting impacts on the Appalachian Trail and adjacent wildlands, like Brush Mountain Wilderness Area and Peter Mountain Wilderness Area.

This Proposed Pipeline Would Cut Right Through The Appalachian Trail | The Huffington Post - Environmental groups are voicing opposition to a proposed natural gas pipeline that would cut across the Appalachian Trail in Virginia and require clearing a previously protected corridor of forest. The Mountain Valley Pipeline would transport natural gas from northwest West Virginia to southern Virginia, according to The Wilderness Society, which published an editorial this week saying the pipeline would set a “dangerous precedent.” That’s because construction would involve clearing a 125-foot-wide section that would cross 3.4 miles of forest protected under the Forest Service’s “roadless rule ― litigation meant to protect lands from road construction and logging.“Some of the most iconic viewpoints, like Angels Rest, along the Appalachian Trail in Virginia will look out upon an ugly swath of destruction that dissects habitat and threatens waterways,” the Wilderness Society writes.Specifically, the pipeline would cross Jefferson National Forest in West Virginia and Virginia, pass through the Appalachian National Scenic Trail Corridor and cross the Appalachian Trail near Virginia’s Peters Mountain Wilderness Area, according to the conservation group Wild Virginia. Multiple environmental groups said this month that they refused to even comment on the government’s Draft Environmental Impact Statement for the project because the draft has so many errors. Other concerns include the public safety of residents, businesses and community organizations that would find themselves in the “blast zone” — a radius of about 1,115 feet around the pipeline where an explosion could have a “significant impact on people or property.” In Newport, Virginia, that zone includes historically significant buildings as well as residents’ homes, according to The Roanoke Times. Other Virginians have expressed fear about threats to groundwater, given the porous nature of the karst landscape of the state’s Giles County where some of the pipeline is slated to go.

Natural Gas Prices Sink on Warm Weather - WSJ: Natural gas plunged to a three-week low Tuesday with warmer weather and expectations for soft demand causing a selloff before the holidays. The market is now down in six of seven sessions since it closed at a two-year high Dec. 9. Natural gas has been one of the best performing commodities of the year, but is still dependent on cold weather to drive demand for winter heating. A combination of higher prices and tepid heating demand could end up diverting more of the near-record-high production from shale into storage sites that are already bloated. Natural-gas futures for January delivery settled down 12.9 cents, or 3.8%, at $3.263 a million British thermal units on the New York Mercantile Exchange. It has lost nearly 13% since gas hit that high point. “The whole thing is weather,” said Mark Waggoner, president of brokerage Excel Futures. Weather forecasts have been predicting far-above average temperatures for several days, but Tuesday’s forecasts grew even warmer. MDA Weather Services in Maryland is forecasting an expanding area of temperatures 5 to 15-degrees-Fahrenheit-above normal covering the eastern half of the country, from San Antonio to Albany, into early January. About half of all U.S. homes use natural gas for heat. And recent cold had been lifting prices until forecasts showed a dramatic change from cooler-than-normal weather to warmer-than-normal starting the last two weeks of December.

NYMEX January gas futures settle at $3.263/MMBtu, down 12.9 cents - The NYMEX January natural gas futures contract traded lower for a fourth straight day Tuesday as increasingly bearish weather forecasts continued to weigh on the market. The contract settled at $3.263/MMBtu, down 12.9 cents. The January contract has now fallen in each of the previous four trading sessions, giving up a combined 30.4 cents, or 8.5%. The fall in the prompt-month contract comes as the latest six- to 10-day and eight- to 14-day outlooks from the US National Weather Service, issued Tuesday afternoon, continued to call for above-average temperatures across the eastern half of the country. "The natural gas market continues to collapse its premium over the $3.20/MMBtu five-year-average price for this time of year as the temperature forecast for the next two weeks trended warmer than a day ago," Citi Futures' Tim Evans said in an email Tuesday. "Warmer-than-normal temperatures from the Southwest and Texas to the Great Lakes and East Coast are seen limiting overall heating demand." Last week, US working gas storage fell by 147 Bcf, nearly double the five-year average, according to Thursday's weekly gas storage report from the Energy Information Administration. Despite early expectations calling for another outsized withdrawal this week, bullish weekly storage numbers have been unable to provide support to prices. Over the next seven days, total US gas demand is expected to average 93.6 Bcf/d, down from the sustained triple-digit levels reached in the previous week, data from Platts Analytics' Bentek Energy showed.The January contract so far on Tuesday has traded in a range between $3.242/MMBtu and $3.408/MMBtu.

U.S. natural gas spikes 5% on bets for massive supply withdrawal - U.S. natural gas futures snapped a five-session losing streak on Wednesday, as investors bid up prices on expectations of a massive U.S. inventory draw. Natural gas for January delivery on the New York Mercantile Exchange jumped 18.1 cents, or 5.5%, to $3.445 per million British thermal units by 8:45AM ET (13:45GMT). Market participants awaited weekly supply data due on Thursday, which is expected to show a draw in a range between 197 and 210 billion cubic feet in the week ended December 16. If confirmed it will be the biggest withdrawal for the week since 2010. That compares with a decline of 147 billion cubic feet in the preceding week, 32 billion a year earlier and a five-year average drop of 101 billion cubic feet. Total natural gas in storage currently stands at 3.806 trillion cubic feet, according to the U.S. Energy Information Administration, 1.3% lower than levels at this time a year ago and 4.9% above the five-year average for this time of year. Futures slumped to a three-week low of $3.242 a day earlier as forecasts for less cold weather and lighter heating demand through the end of the year dragged down prices. About half of U.S. homes use natural gas for heating.

US Shale Gas Industry: Countdown To Disaster -- The countdown has started as the demise of the great U.S. shale gas industry has begun. This will have a disastrous impact on the U.S. economy as shale gas production declines in a big way. Unfortunately, very few Americans understand how sickly the domestic shale gas industry truly is, because they have been brainwashed to believe the United States is heading towards energy independence. For the U.S. to become energy independent, it would have to add at least another five million barrels per day of oil production. At the peak in February 2015, the U.S. shale oil industry produced a little more than five million barrels of oil per day. However, the real problem is not the doubling of U.S. shale oil production, rather it's being able to make a profit in the process. The U.S. shale oil and gas industry hasn't made any real money since 2009. This is especially true for one of the largest natural gas producers in the United States. Chesapeake Energy, which is the second largest natural gas producer in the country, hasn't made a lousy nickel for at least the past ten years:This table comes from the website, gurufocus.com. If you click on the Chesapeake Free Cash Flow link at gurufocus.com, you will see the very same table by scrolling down the page. According to gurufocus, their definition of Free Cash Flow is the following: Free Cash Flow is considered one of the most important parameters to measure a company?s earnings power by value investors because it is not subject to estimates of Depreciation, Depletion and Amortization (DDA). Over the long term, Free Cash Flow should give pretty good picture on the real earnings power of the company.As we can see in the table above, Chesapeake Energy is completely in the RED as it pertains to free cash flow or real profits since 2006. This is quite an amazing accomplishment from the second largest natural gas producer in the country. You would think, being BIG would guarantee profits. I gather someone forgot to tell Chesapeake's management the important financial tidbit called, "Economies of scale." To get an idea of the top five natural gas producers in the United States, I listed them below.

An Inconclusive Conclusion: The EPA's Fracking Study - The EPA recently released the final version of its report on the potential impacts of hydraulic fracturing on water sources. The new version, the culmination of six years of research, reveals gaps in substantive data and excludes a statement printed in the earlier draft report that it found “no evidence that fracking systemically contaminates water” supplies.“EPA scientists chose not to include that sentence,” Thomas Burke, the EPA’s science adviser and deputy assistant administrator of the agency’s Office of Research and Development told the New York Times. “The scientists concluded it could not be quantitatively supported.”The report suggests the possibility that fracking for oil and gas could affect local drinking water. But it explains that certain avoidable conditions are more likely to result in drinking water contamination than others—circumstances such as those created by chemical spills, improper wastewater storage, or mechanical failures while drilling wells.The report’s release is timely. It comes as President-elect Donald Trump, a proponent of oil and gas development who promises to expand fracking and loosen regulations, prepares to take office. This means that going forward, his team of advisors will have to contend with the study’s cautionary scientific findings.While the EPA found some cases of contamination, it concluded that there was not enough substantive data to determine that the drilling technique posed a threat to water supplies. The agency further explained that its conclusions were restricted by available information: “Data gaps and uncertainties limited EPA’s ability to fully assess the potential impacts on drinking water resources both locally and nationally . . . Because of these data gaps and uncertainties, as well as others described in the assessment, it was not possible to fully characterize the severity of impacts, nor was it possible to calculate or estimate the national frequency of impacts on drinking water resources from activities in the hydraulic fracturing water cycle.”

Why some language was removed from new EPA report on fracking - An EPA report about fracking is reigniting fears over the extraction of oil and gas from rock below the earth. The agency says it’s unable to fully characterize the severity of fracking’s impact on drinking water. But it does point to circumstances that could make groundwater vulnerable. The majority of U.S. fracking happens in seven zones – three of them at least partially in Texas, and some residents are concerned, reports CBS News correspondent Manuel Bojorquez. Elizabeth Falconer has installed a $30,000 water filtration system in her garage. She said she’s had her water tested and it came back with chemical levels higher than the EPA recommends.Falconer said the water in her Weatherford, Texas home is undrinkable, even with an expensive filter. “Is there at this point a smoking gun -- something that you could point to to say this is directly linked to fracking?” Bojorquez asked.“Again, I’m not a scientist. I can only say here’s the sequence of time and the only intervening variable between good water and bad water was fracking,” Falconer said. In a report, the EPA described how hydraulic fracturing or fracking activities “can impact drinking water resources under some circumstances,” but the agency can’t say how severely.The EPA is taking a tougher stance than ever before. Language in an earlier draft of the report downplaying fracking concerns was removed. It said: “We did not find evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources.” Burke explained why they omitted the lighter language. “The gaps in information unfortunately do not allow us to say how much, what is the rate of the impact. And so that sentence was removed,” Burke said.

Twofer: Editorial Proves Wall Street Journal Is In Denial About Fracking AND Climate Change - The Environmental Protection Agency’s (EPA) final report on the drinking water impacts of hydraulic fracturing (aka fracking) has provoked howls from The Wall Street Journal’s editorial board, which blasted EPA analysts as “science deniers” pushing “fake news.” But the editorial’s deeply flawed reasoning is the latest evidence that the Journal is in denial when it comes to scientific findings that conflict with its pro-fossil fuel agenda, whether they relate to fracking or climate change.In the December 18 editorial, the Journal misrepresented the changes the EPA made to its draft version of the report, which was released in June 2015:After being barraged by plaintiff attorneys and Hollywood celebrities, the EPA in its final report substituted its determination of no “widespread, systemic impact” with the hypothetical that fracking “can impact drinking water resources under some circumstances” and that “impacts can range in frequency and severity” depending on the circumstances.[...]The EPA now asserts that “significant data gaps and uncertainties” prevent it from “calculating or estimating the national frequency of impacts.”In reality, all of the findings the Journal pointed to in the final version of the report were also present in the draft version. The draft version stated that “there are above and below ground mechanisms by which hydraulic fracturing activities have the potential to impact drinking water resources,” identified “factors affecting the frequency or severity” of those impacts, and acknowledged that "data limitations" prevent the agency from having "any certainty" of how often fracking has actually impacted drinking water. The one change the Journal correctly identified was that in the final version of the report, the EPA rescinded its draft conclusion that there was no evidence fracking has “led to widespread, systemic impacts on drinking water resources.” But contrary to the Journal’s claim that the EPA disavowed that finding because the agency had been “barraged by plaintiff attorneys and Hollywood celebrities,” it was actually changed after the EPA’s scientific advisory board, which evaluates the agency’s “use of science,” pointed out that the draft conclusion wasn’t supported elsewhere in the report:

FERC Suggests Spectra Energy Gas Facility Would Not Pose Cancer Risk, Based on Study by Spectra Consultant - DeSmogBlog - The Federal Energy Regulatory Commission (FERC) concluded in an environmental assessment that a proposed Spectra Energy gas compressor station in a residential Massachusetts neighborhood would not increase the risk of cancer in nearby residents. However, it came to this conclusion via a questionable route — by citing a study done by a firm simultaneously working for Spectra. In May this year, FERC published its environmental assessment for Spectra’s proposed Atlantic Bridge Project, an upgrade to its Algonquin Pipeline. One of the most controversial segments of the project is the construction of a gas compressor station in the town of Weymouth, Massachusetts. The proximity of the station to private homes and a school triggered fierce opposition from many of the town’s residents and elected officials. To address these concerns, FERC staff used a recent study on pollution and cancer risks conducted on compressor stations for a different project, Dominion Transmission Inc.’s New Market. That study found that those compressor stations, which were supposedly larger in size than the proposed Weymouth station, would not pose an increased risk to human health. The study based its findings on air samples provided by the applicant company, Dominion, rather than by an independent third party. To assist its staff in the New Market study, FERC hired TRC, a private environmental and engineering consulting firm. Yet TRC is also Spectra’s main environmental contractor for the Atlantic Bridge pipeline upgrade project. In fact, TRC has been working continuously for Spectra on its various upgrades to the Algonquin Pipeline since at least 2012. TRC and FERC’s staff conducted the study on the proposed compressor stations for the New Market Project throughout the greater part of 2015. During this entire time, TRC was also working directly for Spectra on Atlantic Bridge and its related gas pipeline project, Algonquin Incremental Market. FERC documents show that one of TRC’s employees who participated in the New Market study, Ryan Hale, even worked on Algonquin Incremental Market until at least 2014.

Customers Foot Bill for Florida Utilities to Build ‘Unnecessary’ Gas Infrastructure For Excess Profit - On an August 2015 earnings call, Kelcy Warren, CEO of natural gas company Energy Transfer Partners, acknowledged that “the pipeline business will overbuild until the end of time.” Critics of Florida’s utilities say they believe Warren. They point to state regulators allowing Florida Power and Light (FPL) to build not only new power plants using fracked gas from as far away as Pennsylvania and Texas but also natural gas infrastructure that includes the $3 billion Sabal Trail Pipeline. And Florida residents are footing the bill for these efforts. As Frank Jackalone, Director of Sierra Club Florida, said in recent blog post: FPL has admitted that homegrown solar and batteries could do at least as good a job of powering Floridian homes and businesses — at competitive prices. To make matters worse, FPL is also using these power plants to try to justify building unnecessary gas pipelines such as Sabal Trail and Atlantic Sunrise. In January FPL customers will see their utility bills rise by $400 million, to be followed by $411 million in rate hikes over the next three years. Florida Power and Light, the largest utility in the state, justified the rate increase in a prepared statement, saying it would “support continued investments in FPL’s infrastructure, including the implementation of innovative technologies that help reduce and shorten outages, generate power more efficiently, and curtail fuel consumption and air emissions.” The statement went on to say that FPL expects to continue investing $3.5 billion a year in its infrastructure for the next four years. Detractors say that infrastructure is largely based on producing electricity from fracked gas, not solar, and that much of that natural gas infrastructure is unnecessary, based on demand.

Huge Victory: Winona County, Minnesota Bans Frac Sand Mining -- Winona County, Minnesota has placed a total ban on the strip-mining of frac sand , a necessary component of fracking . This is thought to be the first such countywide ban in the nation. The Winona County Board of Commissioners on Nov. 22 voted 3-2 to ban the mining, processing or trans-loading of frac sand in the county, which is located in the environmentally delicate and beautiful Mississippi River bluff lands of southeast Minnesota. Frac sand is an essential ingredient in fracking, which fractures shale deep underground. The frac sand (also known as silica sand) props open those fractures so that bubbles of oil or gas can flow to the surface. Fracking, a type of extreme energy extraction, cannot take place without this special silica sand. (Although there are more expensive alternatives such as imported ceramic beads or resin-coated sand.) The sand we're familiar with (sand boxes or beach sand) is angular and variable in size, whereas frac sand is almost pure quartz and must be spherical, extremely crush-resistant and uniform in size. The best type of this valuable sand is found in the Upper Midwest, with Wisconsin holding 75 percent of the nation's frac sand market. But the industry has been somewhat stymied in Minnesota due to intense and organized citizen opposition by such groups as Winona County's Citizens Against Silica Mining (CASM) and Minnesota's Land Stewardship Project which spearheaded the ban campaign.

Abandoned Texas oil wells seen as "ticking time bombs" of contamination - — Peculiar things can happen after folks drill deep into the earth — looking for oil, water or whatever — and leave a bunch of holes in the ground. Fluids can gurgle and leak, migrating where they don’t belong. In rare instances, land could even sink or collapse. The oddest unintended consequences tend to bubble up in this pockmarked slice of West Texas, where wildcatters started poking holes in the ground nearly a century ago. “If this stuff was even close to Austin, hell, it’d be national news,” said Ty Edwards, the fresh-faced assistant general manager of the Middle Pecos Groundwater Conservation District, as he barreled down an empty stretch of highway during a June tour of the some of the standouts. Texas, the nation’s petroleum king, is home to nearly 300,000 wells currently pumping oil, gas and dollars into the economy. But those are hardly the only holes that petroleum companies have bored into the Texas landscape. As far back as 1990, Texas touted more than 1.5 million oil and gas-related holes, including hundreds of thousands of test wells, service wells and those that came up dry.

Plan announced to mitigate potential fracking earthquakes in new oil and gas developments - Tulsa World: Latest Earthquake Information From The U.S. Geological Survey: State regulators have announced a plan to regulate new oil and natural gas developments in a proactive approach to mitigate earthquakes potentially caused by fracking. The Oklahoma Corporation Commission issued a news release Tuesday morning stating that state regulators in conjunction with the Oklahoma Geological Survey have developed induced seismicity guidelines focused on two areas expected to account for the vast majority of new oil and gas activity in the state — the SCOOP and STACK. In a prepared statement, OGS director Jeremy Boak said a former state seismologist studied small earthquakes "some years ago" in what is now known as the SCOOP and STACK, with his research showing some of the quakes may have been related to hydraulic fracturing — more commonly known as fracking. Boak noted that more recent small seismic events outside of a large area of interest may also be linked to fracking. Data indicates quakes related to the SCOOP and STACK "would be far less frequent and much lower in magnitude" than seismicity tied to disposal wells in central and northwestern Oklahoma in a 15,000-square-mile area of interest, he said. “We have enough information to develop a plan aimed at reducing the risk of these smaller events as operations commence,” Boak said. “Unlike the strong earthquake activity in areas of the (area of interest) linked to disposal activity, response to seismic activity that might be related to hydraulic fracturing can be more precisely defined and rapidly implemented.”

Oklahoma regulators release 'fracking' plan for induced earthquakes | News OK: Oklahoma regulators released details Tuesday of new guidelines to deal with the risks of earthquakes induced from hydraulic fracturing operations in oil and gas development, an expansion of their previous responses to earthquakes linked to wastewater disposal wells. The hydraulic fracturing plan is an attempt to get ahead of rapid development in the SCOOP and STACK formations in west central and south central Oklahoma. Almost half the 78 rigs drilling in Oklahoma are in those two areas. Regulators and scientists began looking at hydraulic fracturing operations after several small earthquakes were reported south and west of the Oklahoma City area earlier this year. Those areas were outside the large, regional plans to reduce wastewater injection into deep Arbuckle disposal wells that have been linked to induced seismicity. The Oklahoman reported earlier this month that regulators with the Oklahoma Corporation Commission were working on the hydraulic fracturing plan.The guidance document, which was mailed to operators on Friday, establishes a "traffic light" system for dealing with earthquakes potentially linked to hydraulic fracturing operations. Different actions are required after reported earthquakes greater than magnitude-2.5; magnitude-3.0; and magnitude-3.5. The guidelines set up a 2-kilometer (1.25 miles) radius around an earthquake. The guidelines are similar to those developed in Canada and Ohio for dealing with earthquakes linked to hydraulic fracturing. The Oklahoma guidelines escalate from informal conversations to a pause of operations for at least six hours. The "red light" — at earthquakes greater than magnitude-3.5 — involves a suspension of operations and a formal technical conference with regulators. Hydraulic fracturing has long been known to induce earthquakes of very small magnitudes, known as microseismicity. Those quakes are rarely felt at the surface. However, the earthquakes recorded earlier this year near Blanchard and Calumet ranged from magnitude-3.0 to 3.4. Both areas are in SCOOP and STACK plays.

Natural gas production trends in the SCOOP and STACK, Part 1 - The SCOOP and STACK combo play in central Oklahoma recently has emerged as one of the most prolific and attractive shale production regions in the U.S. Like the Permian Basin (albeit on a much smaller scale), rig counts in this play have weathered the crude oil price decline better than most of the rest and, along with the Permian, are leading a rebound as prices move higher. These days, SCOOP/STACK producers are primarily targeting crude oil and condensates, but the area also is seeing a resurgence of natural gas output from associated gas. More than that, given its economics, location and ample infrastructure, gas supply from the region has the potential to be directly competitive with Marcellus/Utica supply. Today, we begin a series analyzing production trends in the SCOOP/STACK, with a focus on natural gas.

‘New Mexico’s DAPL’ is dead — High Country News: The Piñon Pipeline, touted as the Southwest’s version of the Dakota Access Pipeline, has perished, even before the real battle over it began. In mid-December the project’s proponents formally withdrew their right of way application, which was being reviewed by the Bureau of Land Management. Saddle Butte San Juan LLC first proposed Piñon at the height of the oil boom, in 2014. About 50 miles of gathering lines would have taken crude oil from wells in the San Juan Basin’s Gallup Sandstone play to the 100-mile main line near Lybrook, New Mexico. From there, the pipeline would have carried as much as 50,000 barrels of oil per day south — crossing Navajo tribal, federal and state lands along on the way — to a rail terminal between Grants and Gallup, New Mexico. Opponents were concerned not only about how yet another pipeline and potential leaks from it would affect a 100-mile-long swath of land, but also that it would facilitate the fracking frenzy then underway in and around Navajo communities and the Greater Chacoan Cultural Landscape that surrounds Chaco Culture National Historical Park. With some 40,000 wells, the 10,000-square-mile San Juan Basin has produced more natural gas than just about anywhere else. After a nation-wide glut crashed prices and ended the natural gas boom in 2008, however, the Basin’s producers turned almost exclusively to oil, which was still enjoying record high prices at the time. Wells were put in near the Great North Road, a 30-mile long, 30-foot wide architectural feature constructed by the Ancestral Puebloans more than 1,000 years ago. Bulldozers scraped well pads into the badlands immortalized by Georgia O’Keefe in her “Black Place” paintings. And the companies erected huge drill rigs, bulldozed roads and installed sundry infrastructure near homes and even a school in the tiny, loose-knit Navajo communities. In July 2016 three dozen storage tanks near Nageezi caught fire and filled the high desert air with thick, black smoke, as if demonstrating what could go wrong. Since oil pipeline capacity leading out of the Basin is limited, most of the newfound petroleum is trucked from the wells, down dusty dirt roads to the already notoriously dangerous Highway 550, where it continues by truck to larger storage areas, rail tankers or refineries. Thus the proposed Piñon Pipeline would have made moving the oil cheaper and, proponents argued, safer. Soon, the battle was being waged on two fronts: Over the pipeline, and over drilling.

Bonanza Creek, other U.S. energy firms announce Chapter 11 plans - (Reuters) - Bonanza Creek Energy Inc and two other energy firms announced on Friday plans to file for bankruptcy in coming weeks, joining a long list of U.S. energy companies that have succumbed to a drop in oil prices. Oil and gas producers Bonanza Creek and Memorial Production Partners LP and oilfield services provider Forbes Energy Services Ltd each said they had a plan to reduce debt and transfer ownership to creditors. . As of Dec. 14, 114 oil and gas producers had filed for bankruptcy in 2016 with $57 billion in total debt, more than double the number of filings in 2015, according to Haynes & Boone, a law firm that specializes in energy restructuring. Among companies like Forbes that provide well-site services to energy exploration firms, 110 had filed for Chapter 11 protection with $17 billion of debt as of Dec. 14, also more than double the 2015 number, according to Haynes & Boone. Looking ahead to next year, restructuring advisers said they expect more energy-related bankruptcy filings, as the sector prepares for an upturn that could follow implementation of President-elect Donald Trump's pro-drilling agenda or OPEC's plan to cut oil production for the first time in eight years. Denver-based Bonanza Creek, with oil and natural gas assets in Colorado and Arkansas, said it would file for bankruptcy on or before Jan. 5 with a plan to eliminate $850 million in debt and provide $200 million in new equity. The company said it expects to exit bankruptcy in the first quarter of 2017. Bonanza Creek's shares slid 55 percent to $0.88 in morning trade. Memorial Production, with oil and gas assets in Texas, Louisiana, Colorado and California, said it would file for Chapter 11 in coming weeks with a plan to eliminate $1.3 billion of debt. Its shares were down 55 percent to $0.18. Meanwhile, Forbes Energy said it had reached a prepackaged plan with lenders and would file for bankruptcy in Houston on or before Jan. 23, 2017. Its shares lost 6.3 percent to $0.04 in over-the-counter trading on Friday. Earlier this month, Stone Energy Corp filed for Chapter 11 bankruptcy and said it would eliminate about $1.2 billion in debt by transferring control of the company to its noteholders.

Continental's New Well Design In 2015 Reaches Payback In 24 Months - Well design and its effect on production has been the focus of a large number of our analyses. It continues to improve along with volumes of resource recovered per foot. This is being seen in all plays. The complexity of well design is beyond the scope of most investors, so we try to simplify. Well design changes many times refers to increased fluids or proppant usage. While important, it would do little without better stimulation. During completions, or more specifically frac'ing, source rock stimulation is the fracturing of rock. The interval or target, contains oil and natural gas. The resource is trapped in rock, which is opened for the resource to flow. Natural fracturing is sometimes present, but induced fractures must be created to for a horizontal to be a good producer. Frac' jobs have gotten bigger. This has occured through a change from sliding sleeves to plug and perf (shown above). Sliding sleeves are much faster and cheaper, but have limited access points. More perforation clusters are used with plug and perf. The closer these access points are, the greater number of frac's. Operators are finding that cheaper isn't always better. Going back to plug and perf is the continued theme. Most are doing this. Better well design has been seen throughout the industry. Operators like Exxon, Chevron, Conoco, Devon, and Concho ) are just a few names to change to plug and perf or improve on that design.

Random Look At Production Change Month-Over-Month By Operator In The Bakken -- The following table was based on data previously posted on the blog. In previous posts, I posted the same information but at one post I had the September, 2015, data; and, at another post, I had the September, 2016, data. But to the best of my recollection, I never put the data side-by-side, comparing the change year-over-year by operator. I was reminded to do this y-o-y comparison after reading this quote from COP's 2016 analyst day presentation: At last year's Analyst Meeting, we thought we needed 12 to 13 rigs to hold this production [unconventional output] from these three areas flat. We now estimate that off the low point in 2017 we could hold production with only six rigs -- half as many rigs -- and we could grow production about 20% in these three areas by running about 15 rigs. These are the kinds of changes that allow us to hold our production flat for just $4.5 billion of capex per year. That's a pretty startling comment. This has to do with COP's activity in its unconventional plays, the Bakken, the Eagle Ford, and the Permian. COP clearly stated that the engineers thought they would need 12 to 13 rigs to hold production flat year-over-year, but new data showed that COP could hold production flat year-over-year with only six rigs. Assuming all things otherwise equal, if production remains the same year-over-year with half as many rigs, one of two or three or more things, or a combination of these things, must be occurring:

the geologists are getting better and better at locating "tier 1" spots

operators will concentrate on "tier 1" spots in 2017 and reserve "less good" spots for the out years

roughnecks, geologists, and technology are getting better at keeping the horizontal in the seam

Massive North Dakota Oil Spill Still Not Cleaned Up 3 Years Later - In September 2013, a Tesoro Corp. pipeline ruptured in a wheat field near Tioga, North Dakota, spewing 840,000 gallons of fracked oil from the Bakken Shale, causing one of the biggest onshore oil spills in recent U.S. history. More than three years later, only a third of the spill has been recovered. To make matters worse, as the Associated Press reported, Tesoro has not even set a date for clean-up completion despite 'round-the-clock work to fix the break. Cleaning up the spill will set Tesoro back an estimated $60 million. Crews have had to dig 50 feet underground to remove hundreds of thousands of tons of oil-tainted soil, North Dakota Health Department environmental scientist Bill Suess told the AP, adding that he worries that much of the oil may never be completely removed. Critics of oil pipelines argue that spills are not just a question of "if" but "when." Spills are a common occurrence across the country. In fact, there have been more than 3,000 significant incidents since 2006, at a cost of $4.7 billion. "The fact that crews are still trying to clean up Tesoro's spill from over three years ago shows just how unsafe these pipelines are," Greenpeace spokesperson Perry Wheeler told EcoWatch. “There have been well over 200 significant spills across the country in 2016 alone, yet we continue to see fossil fuel companies downplay their impacts and rush them through approval processes," Wheeler added.

Massive Oil Spill Under Farmer’s Crop 3 Years Ago — Still Not Cleaned Up — 200 Miles from DAPL — When North Dakota farmer Steve Jensen discovered crude oil saturating his wheat field in September 2013, he had no idea a pipeline break had belched nearly 1 million gallons of the hydrocarbon onto his precious land — or that, three years later, the company responsible would still be far from cleaning up the toxic mess. “What happened to us happened and we can’t go back,” said Patty Jensen, Steve’s wife, of one the largest onshore oil spills in U.S. history, which happened on their property. “But I get really upset when I hear of a new one and I wonder what is being done to prevent these spills,” she added, according to the Associated Press, of a recent spill that sent 176,000 gallons of crude from a Belle Fourche pipeline in Belfield into the Ash Coulee Creek, a tributary of the Little Missouri River. Oil is believed to have traveled as far as six miles downstream, sullying an untold expanse of private and U.S. Forest Service land — and likely compromising sensitive ecosystems. Despite various criticisms of opposition to Dakota Access, the two crude spills — both from 6-inch steel lines — evince precisely why pipeline opponents cite the oil and gas industry’s astonishingly poor safety record in calls to end all construction of new oil infrastructure. In fact, the 840,000 gallons of crude in the Jensens’ field — despite being one of the largest inside the U.S. — represents a mere fraction of a potential leak from the 30-inch Dakota Access Pipeline. The AP explains:“Both the Tesoro break and the Belfield break occurred on 6-inch steel pipelines — a part of a large network pipelines that crisscross western North Dakota’s oil patch. By comparison, the Dakota Access pipeline is made of 30-inch steel and will carry nearly 20 million gallons daily.” And the Tesoro break occurred on land, away from any waterways and some distance from the nearest residences — Dakota Access is slated to run underneath Lake Oahe — the sole drinking water supply for the Standing Rock Reservation and, downstream, the source of water for some 18 million people.

Only the hardiest remain at Dakota protest camp | Reuters: Two weeks after a victory in their fight against the Dakota Access Pipeline, most protesters have cleared out of the main protest camp in North Dakota - but about 1,000 are still there, and plan to remain through the winter. These folks say they are dug in at the Oceti Sakowin Camp in Cannon Ball, North Dakota, despite the cold, for a few reasons. Most are Native Americans, and want to support the tribal sovereignty effort forcefully argued by the Standing Rock Sioux, whose land is adjacent to the pipeline being built. Others say they worry that Energy Transfer Partners LP (ETP.N), the company building the $3.8 billion project, will resume construction without people on the ground, even though the tribes and the company are currently locked in a court battle. Future decisions on the 1,172-mile (1,885-km) pipeline are likely to come through discussions with the incoming administration of Donald Trump, or in courtrooms. “I’ve seen some of my friends leave but I will be here until the end and will stand up to Trump if he decides to approve the permit,” said Victor Herrald, of the Cheyenne River Sioux Tribe in South Dakota, who has been at the camp since August. At one point the camp had about 10,000 people, including about 4,000 veterans who showed up in early December - just before the U.S. Army Corps of Engineers denied a key easement needed to allow the Dakota Access Pipeline to run under Lake Oahe, a reservoir formed by a dam on the Missouri River. After the Corps decision, Standing Rock chairman Dave Archambault asked protesters to go home. The camp's population now runs from 700 to 1,000, depending on the day, and many come from the nearby Standing Rock reservation where they live.

North Dakota pipeline battle far from over as protesters dig in - By the sacred fire at the heart of the Oceti Sakowin camp, a woman swaddled in layers of clothing makes announcements over a small loudspeaker. “We have a missing woman,” she calls. “Has anyone seen a woman: tall, blonde hair, a blue poncho, and no shoes?” The camp is here, on the border of the Standing Rock Sioux Reservation in North Dakota, to oppose the Dakota Access oil pipeline. But right now the priority is keeping people alive. The temperature is minus 14 centigrade and several inches of snow have fallen. Exposed skin can suffer frostbite in 30 minutes. The missing woman is soon found, but she is one of many people at the camp unprepared for the brutal North Dakota winter. Thousands of environmental activists from the US and around the world have come to support the Native Americans’ battle against the pipeline, many mobilised by the campaign’s popular Facebook pages. The pipeline’s route, which passes the camp about half a mile away, is intended to run under Lake Oahe on the Missouri river, raising fears about possible spills into the water used by the Standing Rock tribe. Earlier this month the Obama administration granted the protesters a temporary victory, denying Dakota Access the permit it needs to sink the pipeline about 100 feet below the lake bed. Dave Archambault II, the chairman of the Standing Rock tribe, told the protesters it was “time to go home”. Many have obeyed him, some leaving their flimsy tents behind them. But thousands are still here, and the battle over the pipeline is far from over. President-elect Donald Trump told Fox News recently that he would “have it solved very quickly” once in office, and is expected to overturn the Obama administration’s decision. At the Oceti Sakowin camp — the name is the Sioux people’s term for their nation — many of the protesters who were leaving said they planned to return next year. Others were hunkering down to last out the bitter winter cold. They have been building wooden huts for shelter, and installing new composting toilets.

Blackstone in talks to buy stake in Energy Transfer assets | Reuters: Private-equity firm Blackstone Group LP (BX.N) is in talks to buy a stake in assets owned by Energy Transfer Partners LP (ETP.N), the company building the controversial Dakota Access pipeline, a source familiar with the situation said on Thursday. Blackstone is discussing joining the deal with Jamie Welch, who previously served as chief financial officer of ETP parent Energy Transfer Equity LP (ETE.N). The deal is expected to be valued at about $5 billion or more, the Wall Street Journal, who first reported the proposed deals, said earlier on Thursday. Blackstone declined to comment while Energy Transfer Partners did not immediately respond to requests for comment. The source requested anonymity because the conversations are not public. It could not be immediately determined whether the stake would support the Dakota Access pipeline, which has been the subject of protests for months because its route runs adjacent Native American land in North Dakota. Protesters have argued that the 1,172-mile (1,885-km) project would damage sacred lands and could contaminate the tribe's water source.U.S. President-elect Donald Trump, who until June had a stake in ETP, has said he is in favor of the pipeline project. Blackstone Chairman and CEO Steve Schwarzman was recently picked by Trump to chair a panel of business leaders who will give him advice. Schwarzman has said he expects to see a "very substantial reversal of regulations of all types," for the financial sector in the wake of Trump's election.

Black Snake Bleeding Out: How DAPL Is Duping Investors - After reaching a peak of over 1 million barrels in December 2014, the Bakken oil field has been in decline. In fact, per a report released by the Institute for Energy Economics and Financial Analysis (IEEFA) and the Sightline Institute last month, Bakken oil output has plunged 20 percent since last year, and by more than 25 percent since that 2014 peak. The downward spiral is not just limited to the Bakken. The United States continues to experience a sharp decline in the amount of oil produced each month. Last month the U.S. Energy Information Administration (EIA) reported that domestic crude supplies fell by 2.4 million barrels, which is larger than the 2.2 million barrel drop reported by American Petroleum Institute (API)—a decline that was anticipated to be 1.7 million. The Bakken Peak has sounded an alarm throughout the local oil and gas industry, which can be heard from construction workers to executives to everyone in between. For instance, the three largest Bakken drillers have experienced a precipitous collapse in revenue of 70 percent since 2014. According to the North Dakota Department of Mineral Resources, oil drillers were adding roughly 157 new producing wells per month during the Bakken peak. In 2016, they were averaging only 44 per month. And the number of oil rigs is not the only thing dropping faster than Alex Rodriguez’s 2016 batting average: Moody’s and S&P have both downgraded the credit ratings for each of those top three Bakken drillers. But oil prices don’t appear poised for a Barker-style comeback. And this is a big problem for ETP, one that may lead to a Showcase Showdown with its backers. That’s because when the oil shippers who want to use DAPL agreed to terms with ETP in 2014, oil prices were roughly $95 per barrel. Since then, oil prices have dropped by over 70 percent, leading to numerous bankruptcies and the loss of approximately 250,000 oil worker jobs—50 percent of the nationwide total. Moreover, while prices have slightly rebounded in recent months, analysts are skeptical that the recovery can be sustained. The bottom line is that there are real questions about whether DAPL investors can actually make money on this pipeline, given that the project’s current contracts with shippers expire on January 1, 2017. Even if it was operational by January 1, 2017, which is now impossible due to the Army Corps decision, the price of oil still would not be at 2014 levels. ETP knows this better than anyone, which may help explain why the company sold almost half of its stake in DAPL this past August to a joint venture involving Enbridge Energy Partners and Marathon Petroleum.

Feds Sued by State of California Over Offshore Fracking -- Citing risks to public health and marine life, California Attorney General Kamala Harris and the California Coastal Commission filed a lawsuit Monday challenging the federal government's inadequate analysis of offshore fracking's threats to the California coast. Monday's suit comes after an oil company proposed to conduct California's first offshore frack in almost two years. The oil company, DCOR, LLC, hopes to frack an offshore well in the Santa Barbara Channel. The company would be allowed to discharge chemical-laden fracking flowback fluid into the ocean. "Kudos to Kamala Harris for fighting to protect our ocean from fracking chemicals," said Kristen Monsell, an attorney with the Center for Biological Diversity . "Offshore fracking raises deep concerns among the millions of people who live, work and play on California's beautiful coast. Whether it's done on land or off our shores, fracking is a toxic threat to our state's air, water and wildlife ." Fearing expanded offshore oil development under the Trump administration , the center and the Wishtoyo Foundation last month filed their own offshore fracking lawsuit against U.S. officials. That suit points to offshore fracking pollution's threats to the ocean, public health, imperiled wildlife and sacred Chumash cultural resources and places. The Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement decided to allow offshore fracking in federal waters off California in May, after releasing a cursory environmental assessment of the practice. The federal assessment failed to fully disclose the chemicals used by oil companies and their effects on marine life and water quality, citing information gaps, yet it acknowledged that those chemicals can be hazardous. The assessment admitted that offshore fracking will prolong offshore oil and gas activities, extending the life of aging infrastructure and increasing the risk of yet more devastating oil spills.

Dirtier than tar sands: California's crude oil secret -- The oil extracted from San Ardo field in Monterey County, California, is known in the trade as “heavy”. It “has the consistency of ketchup”, as Chevron expressed it in legal papers. The company injects steam in the well to soften it up and get the crude flowing to the surface. This high-energy process makes San Ardo one of the most climate polluting sources of oil in the world – worse, even, than Canada’s notoriously dirty tar sands. And it is at the centre of a legal battle brewing between three oil majors and a coalition of community organisers and environmental lawyers. On 8 November, Monterey County passed “Measure Z”, a package of regulations to effectively halt new oil and gas production, with 56% of the vote. Chevron and Aera Energy, a Californian outfit co-owned by affiliates of Exxon Mobil and Shell, sued to block the initiative last Wednesday. The stage is set for a courtroom drama next year pitting corporate property rights against growing concerns about the oil sector’s impact on water resources and the climate. Measure Z was billed as a fracking ban, the seventh at county level in California and the first from a major oil producing area. In fact, its scope is wider, prohibiting a range of practices including disposal of wastewater in aquifers. “Protect our water” is the rallying cry, with California’s ongoing – if easing – drought focusing attention on the importance of groundwater resources. The initiative also makes the case for a local economy based around agriculture and tourism, highlighting the beauty of the landscape. “Oil and gas development projects are industrial operations at odds with the qualities and values that make Monterey County unique and prosperous,” it states.

Obama blocks drilling in Arctic, Atlantic oceans | TheHill: President Obama on Tuesday formally blocked offshore oil and gas drilling in most of the Arctic Ocean, answering a call from environmentalists who say the government needs to do more to prevent drilling in environmentally sensitive areas of U.S.-controlled oceans. Obama is invoking a 1953 law governing the Outer Continental Shelf to block drilling in federal waters in the Arctic's Chukchi Sea and most of its Beaufort Sea. He also protected 21 underwater canyons in the Atlantic Ocean from drilling, White House officials said Tuesday. Canada will block drilling in all of its Arctic Ocean acreage, a moratorium officials will review every five years, the White House said.“These actions, and Canada’s parallel actions, protect a sensitive and unique ecosystem that is unlike any other region on Earth,” Obama said in a statement. “They reflect the scientific assessment that, even with the high safety standards that both our countries have put in place, the risks of an oil spill in this region are significant and our ability to clean up from a spill in the region’s harsh conditions is limited.”The announcement locks in a decision Obama made last month to block drilling in the Atlantic and Arctic Oceans during an offshore leasing plan that runs through 2022. It also cements Obama’s legacy as a president who has taken aggressive unilateral action against climate change and protected more land and water than any previous president.Environmentalists supported Obama’s November leasing plan, but many said he needed to go further and block drilling in the Atlantic and Arctic Oceans once and for all. After he takes office, President-elect Donald Trump could undo the 2017-2022 leasing plan, though it would be a lengthy process. But it’s unclear how Trump could undo Obama's Tuesday announcement: The White House said no previous president has tried to undo a drilling withdrawal under the 1953 law, and that there is no provision to do so.

Obama Administration to Block Drilling in Parts of Atlantic, Arctic Oceans - WSJ: —The Obama administration announced Tuesday that it would indefinitely block oil and natural-gas drilling in vast swaths of the Arctic Ocean and smaller parts of the Atlantic Ocean, the latest in a string of last-minute actions in the face of President-elect Donald Trump’s vows to undo President Barack Obama’s environmental agenda. The announcement carries symbolic significance but little immediate impact, since no commercial drilling is currently taking place in U.S. federal waters of either the Atlantic off the East Coast or the Arctic north of Alaska. Persistently low oil prices have depressed the oil industry’s appetite to make big investments in new offshore projects, and any production would take the better part of a decade to come online. Still, the move shows the efforts to which the departing administration will go to lock in Mr. Obama’s environmental legacy before Mr. Trump takes office in January. Mr. Obama announced the move Tuesday in coordination with parallel actions by the Canadian government, the White House said. “Today, in partnership with our neighbors and allies in Canada, the United States is taking historic steps to build a strong Arctic economy, preserve a healthy Arctic ecosystem and protect our fragile Arctic waters,” Mr. Obama said.Tuesday’s moves, combined with earlier administration action less sweeping in scope, indefinitely block future oil and gas leasing across 125 million acres of the U.S. Arctic Ocean and 3.8 million acres of the Atlantic Ocean, the latter focused on offshore areas from Maryland to Massachusetts, according to the White House. This amounts to one of the largest such withdrawals under current law to date, according to a fact sheet by the Natural Resources Defense Council. Canada’s move, which was to impose a ban on new leasing in its Arctic waters subject to a regular five-year review, is also not expected to have an immediate impact, but it could complicate ongoing efforts by companies such as Exxon Mobil Corp. to extend leases beyond expiration in 2020 or to resume exploration. Other 11th-hour actions by the Obama administration so far include a determination by the Environmental Protection Agency to keep intact tougher fuel-economy standards, a step the EPA accelerated by several months; an Interior Department regulation putting tighter restrictions on coal mining near streams; and an indefinite pause in issuing a final decision on the Dakota Access pipeline in North Dakota.

Eyeing Trump, Obama Bans Arctic Drilling - By Steve Horn - President Obama announced Tuesday what amounts to a ban of offshore drilling in huge swaths of continental shelf in both the Alaskan Arctic Ocean and Atlantic Ocean, a decision which came after years of pushing by environmental groups. Using authority derived from Section 12(a) of the Outer Continental Shelf Lands Act , the White House banned drilling in a 115 acre area making up 98 percent of federally owned lands in the Alaskan Arctic and a 3.8 million acre stretch of the Atlantic extending from Norfolk, Virginia, to the Canadian border. By taking this route, rather than issuing an Executive Order, Obama made it legally difficult for Republican President-elect Donald Trump 's administration to reverse this action. Environmental groups and Democratic senators have praised the decision, while Republican congressional members and industry groups have denounced it. "Today … the United States is taking historic steps to build a strong Arctic economy, preserve a healthy Arctic ecosystem and protect our fragile Arctic waters, including designating the bulk of our Arctic water and certain areas in the Atlantic Ocean as indefinitely off limits to future oil and gas leasing," the White House said in a statement , which also pointed to the "need to continue to move decisively away from fossil fuels," as guided by climate science. President-elect Donald Trump is a climate change denier who repeatedly promised on the campaign trail and during his post-election "Victory Tour" that he would "unleash" more hydraulic fracturing (" fracking ") of oil and gas, and push for more "clean coal" production. Trump also supports increased offshore drilling . U.S. Sen. Lisa Murkowski (R-Alaska), Chair of the Senate Energy and Natural Resources Committee, came out strongly against the Obama administration's move. "The only thing more shocking than this reckless, short-sighted, last-minute gift to the extreme environmental agenda is that President Obama had the nerve to claim he is doing Alaska a favor," she said in a press release , which featured the state's congressional delegation slamming Obama for making the decision. "President Obama has once again treated the Arctic like a snow globe, ignoring the desires of the people who live, work and raise a family there. I cannot wait to work with the next administration to reverse this decision."

Obama Offshore Oil Drilling Ban: U.S., Canada Block Exploration In Arctic, Atlantic Ocean - Before leaving office, President Barack Obama has taken one more action in his efforts to combat climate change by banning oil exploration across much of the Arctic and a stretch of sea canyons in the Atlantic Ocean, according to a report from BuzzFeed. The offshore oil drilling ban was issued by Obama in partnership with Canadian Prime Minister Justin Trudeau as a part of an order that will protect about one quarter of the Arctic waters from oil drilling, including offshore areas in northern Alaska and the Canadian Arctic. The U.S. block exploration at 31 undersea canyons and will prevent drilling across 3.8 million acres of federal waters.The orders from the two North American countries will also set up safe shipping lanes across the Arctic, allowing passage through the area—a feat that is possible thanks to the ongoing melting of the Arctic ice cover. Canada’s ban will require a review every five years. The U.S. ban will be in place “indefinitely,” though may be at risk of reversal under President-elect Donald Trump, who has promised to expand oil exploration and named Exxon Mobil CEO Rex Tillerson as his Secretary of State.“President Obama and Prime Minister Trudeau are proud to launch actions ensuring a strong, sustainable and viable Arctic economy and ecosystem, with low-impact shipping, science based management of marine resources, and free from the future risks of offshore oil and gas activity,” the world leaders said in a statement. “Together, these actions set the stage for deeper partnerships with other Arctic nations, including through the Arctic Council.”The action comes after a considerable push made by environmental groups and a collection of 14 Democratic senators. The group was led by Senator Ed Markey of Massachusetts, who issued a letter to President Obama in October asking the commander-in-chief to place a ban on oil and gas leases in federal waters. According to Markey’s letter, the ban issued by President Obama would be permanent and wouldn’t be subject to reversal under the incoming administration.

Alaska lawmakers mull legislation to block Obama drilling ban | TheHill: Congressional Republicans and their oil industry allies are gearing up to fight President Obama’s new bans on oil drilling in parts of the Arctic and Atlantic oceans. Two Alaska lawmakers are exploring whether they should propose legislation to overturn Obama’s actions. Spokesmen for Sen. Dan Sullivan and Rep. Don Young, both Alaska Republicans, said the lawmakers would consider proposing legislation to help President-elect Donald Trump overturn the bans if necessary. The legislation could either authorize the president to undo any prior offshore protections, or simply overturn the specific bans from Obama.“The Congressman believes this decision can be overturned by the incoming Administration and will be encouraging President Trump to do so. In addition, Congressman Young will also pursue legislation to overturn this decision,” Matt Shuckerow, Young’s spokesman, told The Hill. With both sides in the fight bracing for the long haul, and for the likelihood that it could end up in the courts, the lawmakers want to make Congress's views clear. “Ambiguities in the law will create an opportunity for litigation by the very extreme environmental groups that President Obama was pandering to,” said Mike Anderson, Sullivan’s spokesman. “It doesn’t mean their litigation would succeed, but just as with any number of actions the new administration might undertake, Congress can buttress those decisions with statutory support."

Huge Decline In U.S. Proved Oil And Gas Reserves -- EIA has downgraded its estimates of proved oil and gas reserves in the U.S., according to its Crude Oil and Natural Gas Proved Reserves, Year-end 2015 report, released today. Proved reserves of crude oil in the U.S. declined by 4.7 billion barrels or 11.8 percent from their year-end 2014 level to 35.2 BBbls at year-end 2015. Natural gas proved reserves decreased 64.5 Tcf to 324.3 Tcf, a 16.6 percent decline. Average oil and gas prices in 2015 dropped 47 percent and 42 percent, respectively, from 2014, resulting in more challenging economic and operating conditions. This caused operators to postpone or cancel development plans and revise their proved reserves downward. Proved reserves are volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. The charts below break down the different additions and revisions contributed to the changes. Total discoveries of crude oil kept pace with reserve decreases from production, with 150 million more barrels of crude and lease condensate produced than were found. Discoveries are defined as new fields or reservoirs in previously discovered fields. Extensions are additions to reserves that resulted from additional drilling and exploration in previously discovered reservoirs. In a given year, extensions are typically the largest percentage of total additions while discoveries are usually a small percentage of annual reserve additions. Revisions primarily occur when operators change their estimates of what they will be able to produce from the properties they operate in response to changing prices or improvements in technology. Natural gas extensions and discoveries grew faster than production by 5.4 Tcf.

EIA Admits Huge Decline In U.S. Proved Oil And Gas Reserves - Proved oil and gas reserves down 11.8 percent and 16.6 percent, respectively, from year-end 2014. EIA has downgraded its estimates of proved oil and gas reserves in the U.S., according to its Crude Oil and Natural Gas Proved Reserves, Year-end 2015 report, released today. Proved reserves of crude oil in the U.S. declined by 4.7 billion barrels or 11.8 percent from their year-end 2014 level to 35.2 BBbls at year-end 2015. Natural gas proved reserves decreased 64.5 Tcf to 324.3 Tcf, a 16.6 percent decline. Average oil and gas prices in 2015 dropped 47 percent and 42 percent, respectively, from 2014, resulting in more challenging economic and operating conditions. This caused operators to postpone or cancel development plans and revise their proved reserves downward. Proved reserves are volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. The charts below break down the different additions and revisions contributed to the changes.

Has tight oil put ‘peak oil’ to rest? Not so fast - Eighteen years ago, the International Energy Agency made an alarming and, by its own admission, controversial prediction. Global conventional oil output would peak well before 2020, it said, based on global oil reserve modeling of the day. Pondering the potential repercussions of Peak Oil for the first time, the West’s energy watchdog concluded that the world would need to rely increasingly on future supplies of so-called unconventional oil. The need for more shale oil, tar sands, and coal and gas-to-liquids projects to meet oil demand seemed a given even then. The alarming part was that many of the new resources needed to plug the supply gap were ominously deemed as “unidentified.” Despite only a passing mention of the potential for US oil shales—which at that time were producing only small volumes—that call in the IEA’s flagship long-term outlook proved largely prophetic. Global conventional crude output peaked in 2006 at 70 million b/d and within a decade of the 1998 report, the US shale oil boom had started to take root. Fast forward to 2016 and the IEA’s latest World Energy Outlook again shines a light on the need for more unconventional oil but for different reasons. Back then, the IEA’s bullish economic forecasts saw global liquids demand exceeding 111 million b/d by 2020, a figure which now stands more than 13 million b/d above current forecasts. The concern over a supply shortfall today comes from the collapse of industry spending on new oil projects during the price downturn. With the oil price slump pulling the rug from under upstream spending and investment decisions, the IEA foresees a potential oil supply “gap” of 16 million b/d opening up by 2025.

how far was the IEA off? IEA projected demand at 111 bopd by 202; in fact, current demand is struggling to hit 99 bopd

today: IEA says CAPEX slumped in past two years due to price downturn; price downturn "pulled the rug out from under upstream spending and investment decisions": IEA sees a potential oil supply "gap" of 16 million bopd by 2025

the gap of 16 million bopd by 2025 threatens new spike in oil prices

global tight oil: 4.6 million bopd in 2015; will peak at 7.5 million bopd in 2035

IEA predicts decline by 23.7 million bopd over the next decade alone, the IEA forecasts, the equivalent of losing the entire output of Iraq every two years

So, we'll see.

Stock levels whipsaw the propane market. U.S. propane inventories rose by an impressive 55 million barrels (MMbbl) during the spring/summer/fall of 2014, and the mild winter of 2014-15 left propane stocks at well-above-normal levels the following spring. Another impactful inventory build—53 MMbbl—occurred during 2015’s March-to-November stock-building season, leaving propane stocks at a record 104 MMbbl as the freakishly mild winter of 2015-16 started. But propane inventories grew much more slowly through the spring/summer/fall of 2016, due in part to rising exports, and—while stocks are high as this winter begins—even-higher exports and the possibility of real winter weather raise the specter of an especially big drop in stored volumes. In today’s blog we begin a series on the significance of propane inventory levels with a look at why propane stocks rose so much in the 2014 and 2015 stock-building seasons. If you follow the RBN blogosphere closely you know that we pay a lot of attention to natural gas liquids (NGL) markets in general, and the propane market in particular. In Sail Away, we discussed the growing supply of propane, falling prices and increasing export volumes, while we examined the impact weather has on propane markets in A Perfect Storm, and how prices impact propane as a petrochemical feedstock in Beyond Hypothermia. Last year we produced a comprehensive study for the Propane Education and Research Council (PERC) to assess how propane market developments could impact the prospects for disruptions similar to those that occurred during the “Perfect Storm” winter of 2013-14, a summary of which was published in our Drill Down Report: Next To You and an extensive blog series including Can’t Get Next To You. We’ve also covered the impact falling crude prices are having on NGL markets, including propane supply and demand, pricing, infrastructure and petrochemical margins in our Drill Down Report: It's Not Supposed To Be That Way (Part 1) and (Part 2) and a blog series that included Developing NGL Supply/Demand And Price Scenarios.

Trump's Oil Price Dilemma - President-elect Donald Trump has started naming his picks for key administration offices, and it looks like he is beginning to assemble a team to deliver on at least part of his campaign promises of An America First Energy Plan.Trump’s agenda includes lifting restrictions and opening onshore and offshore leasing on federal lands, eliminating the moratorium on coal leasing, and opening shale energy deposits. The President-elect’s key arguments for these policies are creating high-paying jobs, lessening and even eliminating America’s energy dependence, increasing tax revenues, and adding billions of dollars in economic activity.Even if Trump were to deliver on all his pledges - as far as federal law and federal regulations are concerned - the U.S. oil production would be driven by the market—the economics of the supply and demand that determine the prices of oil.At the time of Trump’s inauguration on January 20, OPEC and a dozen non-OPEC nations are set to begin to reduce crude oil supply with the purpose of killing the global glut and lifting oil prices. Ideally, OPEC/NOPEC taking 1.8 million bpd off the market would speed up the drawdown in global stockpiles and prop up prices.In reality, few expect OPEC to stick to its commitments and cut as much as promised.Still, oil prices are now north of US$50, and OPEC (even if some members cheat) may be able to talk prices up a month or so more. American production has been suffering the consequences of the two-year oil price rout, but if oil stays over US$50 for longer, it would entice more U.S. producers to return to work. Oil prices at US$60 or more would lead to even more confidence among U.S. producers—producers who are now ‘leaner and meaner’ and carefully choosing how to invest.Essentially, Trump’s vision that the oil and natural gas industry could lead to the creation of “another 400,000 new jobs per year” depends on a resurgence in U.S. production, based on higher oil prices. And oil and gas companies in a recovering market may really need to add more jobs after having cut thousands of jobs over the past two years.

Who Won The 2016 Oil War? - Heading into the New Year with oil prices above US$50, both OPEC and the U.S. shale industry are claiming victory in the latest oil war battle—and both expect to benefit from higher prices, but there can really only be one winner here. The oil price crash of 2014 has left OPEC scrambling to offset declining revenues while trying to maintain their much-coveted market share. The price bust - the consequence of a shale boom and the pump-at-will policy of that very same OPEC despite the global oil glut – has sent the U.S. shale patch trying to adapt to lower crude prices by slashing investments and costs and scaling back production. After the failed Doha attempt in April at reaching an agreement, OPEC managed last month to reach a deal on cutting collective output to 32.5 million bpd as of January. It even managed to convince 11 non-OPEC producers – including Russia - to join the global supply reduction with another 558,000 bpd in an attempt to prop up crude oil prices. Saudi Arabia – OPEC’s largest single producer and de facto leader – saw its oil revenues shrink in the past two years to the point of leading to fiscal deficits, a concept unthinkable three years ago. Having recorded fiscal surpluses of 11.2 percent, 12 percent, and 5.8 percent, respectively in 2011, 2012, and 2013, Saudi Arabia has now been running fiscal deficits, which stood at 3.4 percent in 2014 and a massive 15.9 percent last year, figures by the International Monetary Fund (IMF) show. This year’s deficit is expected at 13 percent. The Saudis are canceling projects worth billions of dollars, cutting perks for civil servants, and raising fuel prices. Now the OPEC/NON-OPEC deal to cut global supply – if producers stick to promised cuts – would give the Saudis some respite for their heavily-oil-dependent economy. Still, they believe they won the 2014-2016 oil war with U.S. shale. According to Saudi officials quoted by The Wall Street Journal, the sting to U.S. shale output was worth Saudi Arabia’s and OPEC’s tactics to pump as much as they saw fit.

The End Of The Downturn? BP Steps Up Spending As Oil Prices Rise -- With the rebound in oil prices underway and the astronomic costs stemming from the 2010 Deepwater Horizon disaster in the rear view mirror, BP is once again looking to make large investments. In just the past few days, BP announced a rash of deals in different parts of the world, signaling the British oil major’s intent to grow after several years of shrinking. Over the course of three days, BP announced a $2.2 billion expansion of its existing facility in Abu Dhabi, as well as a nearly $1 billion investment in natural gas fields off the coast of Mauritania and Senegal. Bloomberg calculates that BP has spent $3.8 billion on acquisitions in 2016, the highest tally in four years. BP’s CEO Bob Dudley finds himself in an unfamiliar position – the CEO of a growing company. He took the helm shortly after the Deepwater Horizon disaster, which saw nearly a dozen workers killed and nearly 5 million barrels of oil spilled into the Gulf of Mexico. Since then, he has been cutting costs and selling off assets in order to pay an army of lawyers and court fees. Ultimately, years of litigation and fines cost BP more than $50 billion, and it is much smaller company than it used to be. The shrinking of BP occurred at a time when oil prices traded above $100 per barrel. But the crash of oil prices in 2014 meant that even with the costs of the 2010 disaster mostly accounted for, BP had to undertake a new round of cuts. Now, for the first time in more than a half decade, BP will expand investments around the globe. “It’s time for BP to start growing,” Dudley told Bloomberg TV. “We’ve walked through so many difficulties in the U.S. that I think the company now is well-positioned for growth.”

Is Koch Industries Set To Join The Oil Sands Exodus? - Koch industries Inc. has become the latest in a long line of companies to move away from the Canadian oil sands, stating that it wants to pull out of a project in the Muskwa region. Previously the third largest leaseholder in the sector, Koch Industries cited both economic and regulatory uncertainties as the reason behind its decision. It has been a particularly tough year for Canada’s oil sands, struggling through the oil price crash, witnessing severe disruption due to the Alberta wildfires, and coming under intense scrutiny from environmentalists – most notable Leonardo DiCaprio in his recent climate change documentary “Before The Flood”.Justin Trudeau’s government rubbed salt into the oil sands’ wound earlier this month, announcing a deal to introduce its first federal carbon tax. Critics have claimed that this decision is bound to make the country less attractive to investors, an argument that is gaining traction following Statoil’s recent decision to sell its Kai Kos Dehseh assets and now this latest news from Koch Industries Inc. That being said, the mass exodus from Canada’s oil sands was underway well before Trudeau’s carbon taxation was announced, with Royal Dutch Shell pulling the plug on its Carmon Creek project last year and Exxon Mobil writing down 3.6 billion barrels from the Kearl oil sands project in October. Regardless of the environmental impact, the high capital investment required and the low quality of oil produced makes the oil sands an economically challenging sector. With increasing regulatory uncertainty and pressure from environmental groups, the likelihood of more project sales and cancellations remains high.

Canada’s Oil Exports Are Dead Without U.S. Shale Production - How is it that Canada could be dependent on U.S. oil production? As of 2015, 36 percent of total US crude imports come from Canada. As Canada continues to exports over 3 million barrels per day of oil to the U.S., what direct role does the U.S. have in allowing Canadian oil to flow southward? Canada is a large exporter of low API grade crude referred to as heavy crude oil, most of which comes from Canada’s bituminous Oil Sands deposits. If heavy crude has the consistency of syrup, Canada’s Oil Sands bitumen has the consistency of Kraft peanut butter. Heavy oil and bitumen exports from Canada make up 56% of total conventional oil exports. To deal with the lack of fluid-flow of Canadian heavy oil and bitumen, some oil production is partially refined to produce synthetic crude, which creates more fluidity and allows oil to more easily flow into pipelines and receives a premium price in the crude oil market. Another alternative is that producers blend heavy oil and bitumen with lighter oil that increases the flow of the blended product. One of the common oil products used to blend with heavy oil and bitumen is condensate.When light oils like condensate are blended with heavier oils, the light oil is referred to as a diluent and the blended material is referred to as dilbit. Light synthetic crude is also used in blending with heavy oil and bitumen and the blended product is referred to as synbit. Dilbit consists of 70% bitumen and 30% diluent and synbit consists of 50% bitumen and 50% synthetic crude oil. As Canada’s heavy oil and bitumen production grew over the years, producers’ appetite for condensate grew disproportionately to the domestic supply of condensates. The U.S. has been filling Canada’s condensate gap with light oil production from US shale formations, specifically in the Eagle Ford. Without U.S. imports of condensate, 1.2 million barrels of heavy oil and bitumen would be land locked in Canada and unable be moved through pipelines due to its viscosity.

Dirtier than tar sands: California's crude oil secret -- The oil extracted from San Ardo field in Monterey County, California, is known in the trade as “heavy”. It “has the consistency of ketchup”, as Chevron expressed it in legal papers. The company injects steam in the well to soften it up and get the crude flowing to the surface. This high-energy process makes San Ardo one of the most climate polluting sources of oil in the world – worse, even, than Canada’s notoriously dirty tar sands. And it is at the centre of a legal battle brewing between three oil majors and a coalition of community organisers and environmental lawyers. On 8 November, Monterey County passed “Measure Z”, a package of regulations to effectively halt new oil and gas production, with 56% of the vote. Chevron and Aera Energy, a Californian outfit co-owned by affiliates of Exxon Mobil and Shell, sued to block the initiative last Wednesday. The stage is set for a courtroom drama next year pitting corporate property rights against growing concerns about the oil sector’s impact on water resources and the climate. Measure Z was billed as a fracking ban, the seventh at county level in California and the first from a major oil producing area. In fact, its scope is wider, prohibiting a range of practices including disposal of wastewater in aquifers. “Protect our water” is the rallying cry, with California’s ongoing – if easing – drought focusing attention on the importance of groundwater resources. The initiative also makes the case for a local economy based around agriculture and tourism, highlighting the beauty of the landscape. “Oil and gas development projects are industrial operations at odds with the qualities and values that make Monterey County unique and prosperous,” it states.

India data: Nov crude oil imports rise 12.7% on year - India's crude oil imports in November rose 12.7% year on year to 18.76 million mt, or an average 4.58 million b/d, latest provisional data from the country's Petroleum Planning and Analysis Cell showed. The imports in November were 3.3% higher than October. Domestic refiners have been trying to run refineries at over 100% capacity as local demand soar. Crude imports are expected to rise in financial year 2016-17 (April-March) as the newly commissioned 15 million mt/year Paradip refinery on the east coast ramped up to capacity, and the west coast Kochi refinery completed an expansion to 15.5 million mt/year in May, from 9.5 million mt/year. LPG imports in November rose 38.2% year on year to 1.01 million mt and also 0.5% higher than October. Naphtha imports in November rose 26.6% year on year to 200,000 mt, but fell 7.0% from October.

Russia, Japan deepen ties with agreements on upstream, LNG cooperation - Russian and Japanese companies Friday signed a number of memoranda and agreements on cooperation in hydrocarbons development during the first visit to Japan in 11 years by a Russian president. The agreements included joint exploration offshore Sakhalin, technological and financial collaboration in oil, gas and LNG, and established a mutual fund for such projects. The documents -- 23 of them energy-related -- signed in the presence of President Vladimir Putin and Japan's Prime Minister Shinzo Abe, include three Japanese companies joining Rosneft in hydrocarbons exploration offshore Sakhalin, expanding LNG partnership with Gazprom and Novatek, opening a credit line for Yamal LNG plant and setting up a mutual fund, among other agreements. With a total of more than 80 projects outlined and signed off, the collaboration entered a level "unprecedented in the history of Russia-Japan relations," Abe said in a briefing following the signing ceremony in Tokyo, adding the countries can have "a win-win economic partnership." With Moscow's turn to Asia in search of investors in light of western sanctions targeting the country's energy sector among other areas since 2014, Japan has been conspicuously absent from new deals, while companies from China and India signed numerous agreements to enter the Russian upstream. Ties with Japan have been complicated by a long-lasting territorial dispute over the four Kuril Islands, as well as by Japan joining sanctions, even if in the form of milder restrictions not preventing its companies from taking an active role in oil exploration and production in Russia. The sanctions, as well as volatile commodity prices and resulting currency fluctuations, have led to a 28% year-on-year drop in trade turnover this year, Putin said, expressing the will to turn the situation around, including through greater energy cooperation.

A New World Order Is Emerging In Natural Gas - Brazil’s Petrobras and partners produced their billionth barrel of oil from presalt fields this month. Underlining one of the biggest shifts to happen this decade in global crude output.And news yesterday suggests we may be about to see another mega-shift in energy. In the worldwide natural gas business.That was a deal struck by petro-major BP. Which is spending nearly a billion dollars to get into projects in an unexpected part of the world: western Africa.BP said it has reached an agreement to buy stakes in development projects in Senegal and Mauritania. Which the major is acquiring from junior developer Kosmos Energy, in exchange for $162 million cash — and subsequent payment of $754 million in appraisal and development expenses.That’s a big outlay for BP. But the prize on the western African licenses is commensurate — with Kosmos’ recently-discovered Tortue field in Mauritania holding a currently-estimated 15 trillion cubic feet of natural gas.In fact, BP said it believes the complete acreage acquired under this deal could hold up to 50 trillion cubic feet. And those big numbers have the major eying the region as the world’s newest center for natural gas development.BP’s chief executive officer Bob Dudley summed up these ambitions succinctly. Saying the company is looking to “create a new LNG hub in Africa.” One which he noted will be supported by low production costs and “advantaged access” to global gas markets. Related: Rosneft To Ramp Up Global Expansion Under Trump Indeed, as the map below shows, Mauritania is well-located for shipping LNG to key markets in South America and Europe. Markets that are distant from much of the Asia-focused LNG production building taking place in countries like Papua New Guinea and Australia.

China LNG Imports Hit Record as Memories of Freeze Linger - China’s liquefied natural gas imports surged to a record last month as the world’s third-biggest buyer boosted shipments to offset winter demand and avert shortages that struck cities including Beijing last year. Inbound LNG shipments jumped 46.6 percent to 2.66 million tons in November from a year earlier, according to General Administration of Customs data released Wednesday. Natural gas imports via pipelines increased 7.3 percent to 1.96 million tons in the same period. The rush to shore up supplies comes after Beijing last winter ordered heating to be cut to a low of 14 degrees Celsius on a supply shortage China National Petroleum Corp. said was caused by weather that delayed tanker unloadings. The National Development and Reform Commission, the country’s price regulator and economic planner, in October urged major natural gas suppliers including CNPC to implement plans to increase supply. “LNG suppliers are seeking to avoid the gas shortages seen last winter,” Liu Guangbin, analyst with Shandong-based SCI International, said by phone. “We expect imports to remain high through out the winter months.” China imports are set to hit another record this month, according to a Dec. 21 note from BMI Research. Demand from the country will keep the LNG market tight in the first quarter of next year before new supplies and warmer weather bring prices down in the second quarter, according to the analysts. Beijing’s monthly gas consumption record in winter is six to eight times the minimum monthly usage in summer and the city’s daily consumption during winter increases by 3 million to 3.5 million cubic meters when the temperature falls by 1 degree Celsius, according to CNPC.

Russian 2016 gas output nearly flat on year at 637 Bcm: minister - Russia's gas production, including associated petroleum gas, is estimated at 637 Bcm in 2016, which would represent a marginal increase of 0.2% year on year, energy minister Alexander Novak said late Tuesday. At the same time, gas exports from the country are estimated to have risen around 5% at 202.3 Bcm, Novak said. The figure includes LNG deliveries. The increase in exports was mainly supported by purchases of pipeline gas by European clients earlier this year. Total Russian gas supplies to Western Europe and Turkey in the first nine months of the year rose 8.8% to 103.25 Bcm, on the back of strong Russian flows in the first quarter of 2016, when Russian oil-indexed contracts were relatively cheap following the oil price crash. Coal output is expected to rise 3.2% year on year to 385.4 million mt, with exports increasing 5.8% to 165 million mt, Novak said.

Iran, Russia hope to restart 150,000 b/d oil swaps: report - Iran hopes to restart crude oil swaps of 150,000 b/d with Russian oil companies, oil minister Bijan Zanganeh said Saturday. "During the trip by the Russian energy minister to Tehran, we didn't discuss it, but Lukoil is following this plan up," Zanganeh was quoted as saying by the state IRNA news agency Saturday. Oil swaps between Iran and the Caspian states, which include Russia, stopped in 2010, when Iran's then oil minister Masoumi Mirkazemi described the terms of the swaps an "unfair deal" and strengthened international sanctions forced the oil companies involved to pull out. "Russia's Gasprom is also taking some measures to cooperate with Iran for gas swap," Zanganeh was quoted as saying Saturday. As part of an oil-for-goods deal, Iran is ready to sign an agreement to supply 100,000 b/d of crude to Russia, Zanganeh said earlier this month, in the latest sign of the two nations' strengthening mutual ties in the face of Western sanctions. Iran has also signed an agreement with Russia's Gazprom Neft for development studies on the Changouleh and Cheshmeh-Kosh onshore oil fields. Along with a deal for development studies with Lukoil, Zarubejneft and Tatneft, Russian oil companies have become the most active potential investors in Iran's oil and gas sector.

After Agreeing To Cut, Is OPEC’s No.2 Going Rogue? - Just a week after it agreed to OPEC’s output-cut deal, Iraq is showing signs of going rogue, and instead of cutting crude exports—a logical byproduct of lowered production—it plans to increase oil sales in January. According to an oil-loading schedule dated December 8 and viewed by The Wall Street Journal, Iraq’s state-owned oil marketing company SOMO plans to increase shipment of its Basra export grades to 3.53 million barrels per day in January, which would be a 7-percent increase from October volumes—an increase that is no small matter, as Basra grades sales account for around 85 percent of Iraqi crude exports.While production and exports do not necessarily rise and fall at the same time due to storage and domestic consumption, Iraq’s consumption is only 15 percent of its oil output and relatively stable. In addition, the country’s total maximum storage capacity is just over 10 million barrels, a capacity insufficient to fully account for higher Basra exports.According to the documents the WSJ has seen, Iraq’s planned sales to Indian and Chinese refiners in January would be 390,000 bpd higher than its December deliveries.In contrast with Iraq, some other Middle Eastern producers are already adjusting their January exports to comply with the cuts. Abu Dhabi National Oil Company (ADNOC), for example, has said that it would reduce crude oil supplies next month in line with OPEC’s decision. In OPEC’s November 30 deal, Iraq committed to cut production by 210,000 bpd effective January, from a reference production level of 4.561 million bpd. Iraq was one of the last holdouts of the OPEC deal in the months leading to the decision to curtail production: first disputing the sources that OPEC uses to estimate members’ output, then demanding exemption on the grounds that it needs oil revenues to fight Islamic State.

We Need to Accept That Oil Is a Dying Industry - Motherboard has an article from Nafeez Ahmed on the dim long term prospects for the oil industry - We Need to Accept That Oil Is a Dying Industry. The future is not good for oil, no matter which way you look at it. A new OPEC deal designed to return the global oil industry to profitability will fail to prevent its ongoing march toward trillion dollar debt defaults, according to a new report published by a Washington group of senior global banking executives. But the report also warns that the rise of renewable energy and climate policy agreements will rapidly make oil obsolete, whatever OPEC does in efforts to prolong its market share. ... As oil gets more expensive again, there is more incentive to use alternative, cheaper forms of energy—like solar photovoltaics, which can now generate more energy than oil for every unit of energy invested. ... A report published in October by the Group of 30 (G30), a Washington DC-based financial advisory group run by executives of the world’s biggest banks, warns investors that the entire global oil industry has expanded on the basis of an unsustainable debt bubble. ... The industry’s long-term debts now total over $2 trillion, the report concludes, half of which “will never be repaid because the issuing firms comprehend neither how dramatically their industry has changed nor how these changes threaten to soon engulf them.”

Hedgies Have Never Been More Bullish On Oil As Shorts Crushed For 5th Time -- Despite extending gains overnight on the heels of Libya's planned production boost stalling, oil prices are sinking back into the red this morning as yet another major short-squeeze appears to have run its course for now. As Bloomberg reports, oil extended gains (over $53 a barrel for Feb 2017 WTI) overnight as a planned production boost from Libya stalled amid continuing tension in the OPEC member that’s exempt from output cuts. Libyan oil-facility guards backtracked on an agreement to allow supply to flow from the El Feel and Sharara fields, two of the country’s biggest, according to an engineer that operates El Feel. A group of Libyan guards prevented the flow of oil by pipeline, Khaled Hadloul, an engineer at Mellitah Oil & Gas, which operates El Feel, said by phone. The Repsol SA-operated Sharara field is also yet to restart because both fields feed into the same pipeline network, Hadloul said. But prices are sliding back into the red this morning as the dollar gathers steam once again...

Oil prices rise on expected decline in U.S. crude stocks | Reuters: Oil prices rose on Tuesday on forecasts of a steep draw in U.S. crude stocks that could indicate global oversupply is starting to shrink. Benchmark Brent crude oil futures were trading up 56 cents, or 1 percent, at $55.48 a barrel at 1329 GMT. U.S. West Texas Intermediate (WTI) crude futures CLc1 were up 29 cents at $52.41 a barrel, not far off a one-week high of $52.52. Analysts polled by Reuters expected weekly U.S. crude oil inventories to show a draw of 2.4 million barrels in the week to Dec. 16. Stocks fell more than expected in data published last week, lifting expectations for another large drop in this week's data. A deal to cut global supply among OPEC and non-OPEC producers struck this month has boosted oil prices to 17-month highs. The gains have set up 2016 to be the first year since 2012 in which Brent has risen. Russian Energy Minister Alexander Novak told Russian newspaper Vedomosti that Russia may extend a production cut beyond the first half of 2017 if needed. "We are in a wait-and-see mood after OPEC newsflow caused much volatility," said Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg. "The new balance seems to be between $53 and $57 a barrel on Brent for the next weeks."

Oil Holds Steady On Holiday Trading -- Oil prices were up slightly to start the week, but trading has been relatively light due to the holiday season. With the OPEC and non-OPEC negotiations in the rear-view mirror, there are fewer headline catalysts for oil prices, softening volatility a bit. The U.S. added more rigs to the shale patch last week, further evidence that the industry is getting back to work. Weekly production figures also continue to climb. Meanwhile a handful of terrorist attacks were seen around the world on Monday – the assassination of the Russian ambassador to Turkey and the running down of about a dozen people in Berlin by a truck. Oil markets, however, did not seem rattled by the horrific news. On Monday an oil tanker docked at the Es Sider port, Libya’s largest crude oil export terminal, to load the first cargo following two years offline. The port reopened in September but has been under repair since then. Before the outage, Es Sider exported 350,000 bpd of supply. Other ports have come online in recent months, allowing Libya to double production to 600,000 bpd. The country has a target of ramping up to 900,000 bpd next year, and Es Sider will be crucial to the achievement of that target. While the Obama administration has already withdrawn lease sales for the Chukchi and Beaufort Seas as part of the Interior Department’s Five Year Drilling Plan for 2017-2022, President Obama is reportedly considering a bolder move to block Arctic drilling more or less permanently. Bloomberg reports that the President could use a 1953 law that would allow him to remove U.S. waters from future lease sales. The law has been used to conserve sensitive marine areas such as coral reefs, but environmental groups have been pressing him to invoke the law to make it more difficult for future administrations to open up the Arctic for drilling. There is not much of a legal precedent on this issue, so the effect would be uncertain. On the one hand, the move could make it difficult for the Trump administration to reverse, delaying Arctic drilling for years. On the other hand, it could backfire: a Republican-led Congress could vote to repeal the law altogether, removing the ability of future presidents to conserve marine territory. Bloomberg says a decision could come as soon as Tuesday.

Oil Jumps After Bigger Than Expected Inventory Draw - Expectations were for more inventory draws in total crude levels (and another build in Cushing), but API reported a considerably larger than expected 4.15mm draw in overall crude inventories. Both Gasoline and Distillates saw notable draws and Cushing built for the 4th week in a row (but less than expected). WTI crude kneejerked higher on the news... API

WTI Sinks On Libya Production Fears (Again) - The overnight rally in crude following API's unexpectedly large crude inventory drawdown has been erased as more headlines from Libya send WTI lower. Bloomberg reports that output will be 900k b/d beginning next yr, NOC Chairman Mustafa Sanalla says in Cairo, and is expected to reach 1.2mm barrels per day by the end of 2017. And the reaction is fear.. As Bloomberg Briefs details, Libya reopened two of its biggest oil fields and is set to load its first crude cargo in two years from its largest export terminal as the war-torn country pursues plans to almost double output in 2017. Pipelines connecting the Sharara oil field to Zawiya refinery, and the El-Feel deposit to the Mellitah energy complex, reopened at the town of Rayayina, according to a statement by the state-run National Oil Corp. The reopening of the fields will help boost the country’s oil production by 175,000 barrels a day within one month and 270,000 barrels a day within three months, it said. Also, a tanker is set to load the first export from Es Sider oil port since the terminal was closed in 2014. “I welcome the statement by the Rayayina Patrols Company of the Petroleum Facilities Guard, Western Branch, announcing lifting of the blockade on all the pipelines,” NOC Chairman Mustafa Sanalla said in the statement posted yesterday on the company’s website. “There were no payoffs and no backroom deals. For the first time in nearly three years, all our oil can flow freely. I hope this marks the end of the use of blockade tactics in our country.” Libya’s comeback will put more pressure on OPEC and other major producers that agreed over the past three weeks to cut their output to rein in an oversupply and shore up prices. The North African nation, which was exempted from OPEC’s planned cuts because of its internal strife, is currently producing 600,000 barrels a day, less than half of the 1.6 million it pumped before a 2011 uprising.

Oil Declines as U.S. Crude Inventories Unexpectedly Increase - Oil declined after a government report showed U.S. crude stockpiles increased for the first time in five weeks.Crude stockpiles rose 2.26 million barrels last week, according to the Energy Information Administration. A 2.5 million decrease was forecast by analysts surveyed by Bloomberg. More than half of the gain was on the West Coast, where the distribution system is isolated from the rest of the country. The industry-funded American Petroleum Institute reported Tuesday that crude supplies declined 4.15 million. Oil has traded near $50 a barrel since the Organization of Petroleum Exporting Countries agreed Nov. 30 to cut output for the first time in eight years. Non-OPEC producers including Russia will also trim supply. "The number was clearly a surprise after the big draw last night," "Inventories have fallen substantially in recent weeks, and I bet there will be another big draw next week. Refineries are running pretty hard right now." West Texas Intermediate for February delivery fell 81 cents, or 1.5 percent, to settle at $52.49 a barrel on the New York Mercantile Exchange. The January contract expired Tuesday. Total volume traded was about 24 percent below the 100-day average. Brent for February settlement slipped 89 cents to $54.46 on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $1.97 premium to WTI. Nationwide inventories increased to 485.4 million in the week ended Dec. 16, and are at the highest seasonal level since the EIA began tracking weekly data in 1982. Supplies on the West Coast, known as PADD 5, increased by 1.28 million barrels to 51.8 million. Stockpiles in the Midwest, or PADD 2, advanced by 1.02 million barrels to 149.3 million.

First overall build in 5 weeks but biggest Cushing draw in 2 months...As Reuters notes also, US Crude stocks have not exhibited normal drawdown before the end of the year. Stocks now +171 million bbl (+54%) over 10-yr average

Oil prices fall on U.S. inventory build; Libya output ramps up | Reuters: Oil futures fell on Wednesday after Libya said it expects to boost production over the next few months and a report showing a surprise build in U.S. crude inventories last week. Brent futures for February delivery fell 89 cents, or 1.6 percent, to settle at $54.46 a barrel, while U.S. West Texas Intermediate crude for February lost 81 cents, or 1.5 percent, to $52.49 per barrel. Even though WTI futures for February were down, the U.S. front-month gained about 0.5 percent due to the contract roll from lower-priced January to the higher-priced February on Tuesday and closed at its highest level in over a week. "The big news of the day is that it looks like we're going to get more crude out of Libya," said James Williams, president of energy consultant WTRG Economics in Arkansas. Libya's National Oil Corporation (NOC) confirmed on Tuesday that pipelines leading from Sharara and El Feel fields had reopened, saying it hoped to add 270,000 barrels per day (bpd) to national production over the next three months. "The big question is what will OPEC do about the Libyan increase. With Libya excluded from the production cut agreement, I anticipate the Saudis will unilaterally balance the Libyan crude," WTRG's Williams said. On Nov. 30, OPEC agreed to cut output by 1.2 million bpd for six months from Jan. 1, with top exporter Saudi Arabia cutting around 486,000 bpd. On Dec. 10, non-OPEC countries including Russia agreed to reduce output by 558,000 bpd, the largest-ever contribution by non-OPEC producers.In the United States, U.S. crude stocks rose by 2.3 million barrels in the week to Dec. 16 even as refineries hiked output, while gasoline stocks and distillate inventories fell, the U.S. Energy Information Administration said. That was the first weekly build in crude stockpiles in five weeks. Analysts were expecting U.S. crude inventories to fall by 2.5 million barrels, according to a Reuters poll.

OilPrice Intelligence Report: Libyan Supply Fears Dampen Oil Price Optimism: Oil prices remained mostly stable this week on light trading and few major price-altering headlines. However, some weakness in the rally emerged as fears over restored Libyan supply weighed on prices. The influence of the OPEC production cut appears to have all but left the markets now, with trading slowing down into the new year.Libya’s oil output is set to surge in the next few months as long shuttered pipelines restart operations. The pipelines can carry 270,000 bpd, which is equivalent to almost half of the country’s current output. The restart of operations could bring lost output online within the next three months, the National Oil Company says. Great news for Libya, but bad news for OPEC. Libya is exempt from any cuts as part of the November agreement, and if Libya succeeds in adding back 270,000 bpd, it would wipe out roughly a quarter of the OPEC reductions. Additionally, that comes on top of nearly 300,000 bpd the country has added since this past summer, taking output up to 600,000 bpd. Canadian Prime Minister Justin Trudeau said that he talked with President-elect Donald Trump, who expressed his support for reviving the Keystone XL Pipeline. Trudeau supports the pipeline. At the same time, Trudeau said that Canada could take advantage of the vacuum left by the U.S. backing off support for renewable energy, which would allow Canada to attract more green tech investment. U.S. federal regulators issued a crucial permit for a new LNG export terminal along the U.S. Gulf Coast. The Golden Pass LNG facility was originally an import terminal but has undergone a $10 billion retrofit to turn it around for export. The project is owned by Qatar Petroleum (70 percent), along with smaller stakes held byExxonMobil and ConocoPhillips. The facility will be able to export 2 billion cubic feet of gas per day. Anadarko Petroleum announced its decision to sell off natural gas fields in Pennsylvania’s Marcellus Shale for $1.2 billion. The company will use the proceeds and smaller footprint to expand in the booming oil fields of the Permian Basin in Texas and the DJ Basin in Colorado. The move is a sign of the times: more and more shale companies are pulling capital out of less competitive areas and concentrating funds in a few prized shale basins.

Oil rig count rises for 8th straight week, Baker Hughes says - -The US rig count jumped by 13 to 523 this week, according to oilfield-services company Baker Hughes. The oil rig count is about 13 rigs away from recovering all the losses recorded this year. The addition of rigs in recent weeks, in response to more stable oil prices, has already proven to be a streak not seen since prices crashed two years ago. Gas rigs increased by three to 129, and miscellaneous rigs were unchanged at one, taking the total up by 16 to 653. Last week, the oil rig count jumped by 12. West Texas Intermediate crude oil futures traded lower but little changed on Friday, down 0.2% to $52.84 per barrel on a quiet day for global markets.

The U.S. Oil Rig Count Hits Its Highest Level Since January (graphs) Baker Hughes has reported yet another increase in the U.S. oil and gas rig count this week, with 16 more rigs coming online. The previous two weeks have seen increases of 13 and 27 respectively, bringing the total number of active rigs to 653. The U.S. is now just 47 rigs below the count this time last year, evidencing the recovery that is being seen in both U.S. oil and gas. The most recent climb has largely been fueled by the OPEC production cut agreement, and while not a single barrel has yet been cut by the cartel, the promise to reduce supply has clearly been enough for the U.S. shale patch to begin bringing rigs back online. The oil rig count continues to follow the lagged oil price perfectly, suggesting that we are far from seeing an end to the recent climb in oil rigs. Oil rigs once again led the way this week, with an increase of 13 compared to just 3 gas rigs. While the oil rig count has seen a remarkably strong rebound since the OPEC agreement, it remains far below the highs of 2014. Oil prices continued to trade slightly lower following the rig count release, with WTI trading at $52.84 and Brent trading at $54.99 at the time of writing.

US Oil Rig Count Surges To Highest Since First Week Of January --Following a dramatic surge in US oil rig counts the last two weeks, Baker Hughes reports oil rigs rose once again (the 28th weekly rise of the last 30) by 13 to 523 - the highest since the first week of January 2016.. The oil rig count is tracking the lagged oil price perfectly still... US crude production looks set to continue to rise - tracking the lagged rig count rise - much to the chagrin of the Saudis... There was no reaction in crude futures prices at all.. (graphs)

Russia says trust needed for global oil output deal to be success | Reuters: Trust between oil producing countries is important if a global deal to curtail output is to succeed, Russian Energy Minister Alexander Novak said on Wednesday. Earlier this month, OPEC and non-OPEC oil producers led by Russia signed a deal to cut oil output by almost 1.8 million barrels per day in order to prop up weak prices. OPEC countries have had a mixed history when it comes to complying with output targets, often reneging on their pledges. But Novak said he was sanguine about the latest deal. "We have no grounds to believe that someone will deviate (from the deal)," Novak told the Rossiya-24 TV channel. "It is important to keep trust between countries, If we fail, we will hardly be able to reach such deals in the future. The countries have to stick to these agreements," he said. Novak also said Russia's output of hard-to-recover oil would increase by 20 percent this year compared to 2015.

Feature: Cheating on OPEC-led output cuts difficult to track, buying producers time - The five-country committee to monitor the OPEC-led global oil production cut meets in early January to hash out the politically sensitive particulars of how to adjudicate and enforce compliance. But the reality that the committee -- and the oil market at large -- faces is that any cheating on quotas is unlikely to become fully apparent until several months into the six-month deal, which begins January 1. OPEC has agreed to use the six independent sources its analysts have adopted to track production in the organization's monthly oil market reports.Those secondary sources -- which include S&P Global Platts -- compile monthly estimates of each country's output for the preceding month. So, production in January will be reported by the secondary sources in early February. The market will clearly be watching those February reports for the first signs of noncompliance, but it could take a few months before more definitive trends emerge, since the quotas are meant to be an average of production over the six months of the deal. Despite this and OPEC's historical "tendency to cheat," as former Saudi oil minister Ali al-Naimi recently put it, the market has responded bullishly to the deal, sending prices up some 18% since November 29, the day before OPEC met in Vienna and finalized its 1.2 million b/d in cuts. Eleven non-OPEC countries, led by Russia, followed up with 558,000 b/d in committed cuts on December 10. "The market is probably expecting some kind of cheating but for now the cartel has once again bought themselves some time, which funds have bought aggressively into," said Ole Hansen, an analyst with Saxo Bank. The non-OPEC commitments will be even harder to verify.

Russia suggests to hold 1st OPEC/non-OPEC monitoring group meeting around Jan 20 - Russia suggested to the five-country committee monitoring the OPEC-led global oil production cut to meet around January 20 to look into the participants' compliance but no final decision on the date has been taken so far, Russia's energy minister Alexander Novak said. "The dates have not been agreed on. The work is under way. We believe we have to meet around the 20th," Novak said late Tuesday. Following the landmark six-month agreement by OPEC countries to cut their crude output by 1.2 million b/d from October levels, 11 non-OPEC countries led by Russia agreed to join the initiative by cutting their combined output by 558,000 b/d. Of this, Russia's commitment is 300,000 b/d cut. There is still a widespread skepticism in the market whether the countries will be able to fully deliver on their commitments. The monitoring committee's discussion is to focus on the mechanism of monitoring each country's production cuts and enforcing the agreement, although what the committee can and will do in the case of non-compliance remains an open question. Chaired by Kuwait, the committee also includes Venezuela and Algeria from OPEC, as well as non-OPEC Russia and Oman. Regarding OPEC, the group has agreed to use the six independent sources its analysts have adopted to track production in the organization's monthly oil market reports. Those secondary sources -- which include S&P Global Platts-- compile monthly estimates of each country's output for the preceding month. So, production in January will be reported by the secondary sources in early February.

Oil, Chaos And Geopolitics In The New Year - This year, oil prices have sunk and risen at the whim of speculation regarding an agreement to reduce production by OPEC, which controls roughly 40 percent of the world’s oil exports. Negotiations on the terms of the deal occurred against the background of major geopolitical conflicts, with governments and non-state actors struggling to gain recognition and/or notoriety to further their own agenda. These are their stories, and this is where you can look for geopolitical chaos and volatility in the oil patch in the New Year:

Libya: The second half of 2016 has been a comeback period for Libya – a country that has begun to revive its oil sector after four years of civil war and terrorist insurgencies in the aftermath of the fall of dictator Muammar Gaddafi. The government’s latest forecasts put national production at 900,000 barrels per day over the next couple of months – a more than 30 percent increase on the 600,000-barrel rate the nation is currently pumping.

Iraq: Despite Iraq’s insistence on being exempted from any OPEC freeze deal due to the high costs of fighting the Islamic State - particularly in the oil-rich areas of Fallujah, Mosul and beyond – the terms of the agreement have the country cutting output by nearly 20 percent to achieve the bloc’s 32.5 million-barrel-per-day limit.

Kurdistan Regional Government: An additional challenge to Iraq’s financial situation is the Kurdistan Regional Government’s (KRG) reluctance in implementing oil production limits agreed upon by Baghdad at the November 30th meeting in Vienna. To make good on the OPEC deal, Iraq must reduce crude output by 210,000 barrels a day from October levels. Kurdistan controls about 600,000 barrels a day of oil production, or approximately 12 percent of Iraq’s total output.

Iran: Tehran walked out of the OPEC deal a star. Members of the national parliament declared Iran’s 3.797 million-barrel cap a diplomatic victory, even if the country did not manage to secure the exemption it had desired. As Saudi Arabia prepares to carry out the bulk of the cutting, as outlined by the agreement, Iran can begin to win back market share that the KSA had stolen during Tehran’s period of economic isolation. Saudi Arabia’s retreat – coming on the heels of the Kingdom’s over-eager production increases – will be a boon to Iran’s new rise as an oil supplier in 2017.

Nigeria: The Niger Delta Avengers (NDA) have wreaked havoc on the country’s oil profits, causing an estimated $4.8 billion in lost revenues. Tacked on to the cost of hunting down the militiamen in the Niger Delta, 2016 could not have been a worse year for Nigeria’s budgetary woes.New arrests and oil finds – as well as an exemption from OPEC’s freeze deal – leave Nigeria in the position to fight back in 2017.

Venezuela: Venezuela’s economy has tanked so badly from fallen oil revenues this year that it opened its borders with neighbor Colombia several times to allow its citizens to buy medical and day-to-day supplies from the rival country. An economic crisis that began before the start of the oil price crash in 2014 has only been furthered by two years of an under-$50 barrel. Brewing social unrest leaves Venezuela’s political future uncertain, even as oil prices recover in the coming years.

Brazil: Petrobras, Brazil’s national oil and gas company, has been on a liquidation spree in 2017 with a plan to eliminate $4 billion in assets by the end of December and $15.1 billion by 2018. Last week, Petrobras announced that it had entered into a 10-year, $5 billion financing deal with China Development Bank Corp and will be selling over a period of 10 years a total volume of 100,000 bpd to China National United Oil Corporation, China Zhenhua Oil Co. Ltd, and Chemchina Petrochemical Co. Ltd, Still, the deal represents a tiny portion of the funds the company needs to truly get back in the oil game – funds that it can only generate through a solid price recovery.

Saudis Forecast $51 Oil In 2017 Rising To $65 By 2019; Will Spend 20% Of Total Budget On Military - After suffering two record budgets shortfalls in 2015 and 2016 as a result of plunging oil prices, and which nearly brought both Saudi Arabia's economy and banking sector to a standstill, not to mention billions in unpaid state worker wages at least until generous foreign investors funded the Kingdom's imminent cash needs with its first, and massive, bond sale ever, today Saudi Arabia released it budget outlook for the next year. And while the Saudis believe the country's budget deficit will fall modestly next year even with an increase in spending, it is still set to be a painful 8% of GDP suggesting the Saudi cash burn will continue even with some generous oil price assumptions. The budget deficit for 2017 is expected decline 33% to 198 billion riyals ($237 billion), or 7.7% of GDP, from 297 billion riyals or 11.5% of GDP in 2016 year and 362 billion riyals in 2015, the Finance Ministry said in a statement on its website on Thursday. In 2016, the finance ministry said its spending of 825 billion riyals ($220 billion) was under the budgeted 840 billion, and the 2016 budget deficit came to 297 billion, below the 362 billion in 2015.

Saudi 2017 budget projects 46% rise in oil revenues, no details on fuel price hikes - Saudi Arabia expects to earn 46% more from oil revenues in 2017 compared to this year, with expectations of rising global demand combining with the OPEC-led global production cut to push prices higher. In its annual budget unveiled Thursday, the kingdom said its oil revenues were projected to hit Riyals 480 billion ($128 billion) next year, up from Riyals 328 billion ($88 billion). The budget did not reveal any details about Saudi Arabia's oil production plans or targets, nor does it say what price it expects to receive for its oil, though it cited the International Monetary Fund's estimate of 2017 oil prices at $50.60/b. Oil prices in 2016 averaged $43/b, the budget document said. Overall revenues for 2017, including non-oil revenues, are expected to rise 31% from 2016 levels to Riyals 692 billion. With the budget laying out an expenditure plan for Riyals 890 billion ($237 billion), an 8% increase over this year, this means the kingdom will be facing a deficit of 198 billion riyals ($53 billion), down 33% from this year, as Saudi Arabia has had to tap into its reserves to withstand the low oil price environment of the last two years. "The 2017 budget was prepared in light of developments in the local and global economy, including the estimated price of oil," the budget document states, attributing the increases in projected revenues and expenditures to energy pricing reforms. "As the kingdom's economy is strongly connected to oil, the decrease in oil prices over the past two years has led to a significant deficit in the government's budget and has impacted the kingdom's credit rating." Total national debt for 2016 was about Riyals 316.5 billion ($84 billion), or 12.3% of projected GDP.

Saudis Brace for More Economic Pain - The cost of living in Saudi Arabia rose over the past year as the kingdom contends with lower oil prices and slashes to subsidies. Now Saudis are girding themselves for additional cuts that risk provoking public ire. Subsidies have long insulated Saudi citizens from economic uncertainty, but already reduced government assistance to pay for fuel, electricity and water and the prospect of less aid down the road have raised concerns among jittery Saudis. Saudis have for decades enjoyed a comfortable lifestyle supported by the kingdom’s oil wealth. They are closely watching the government’s budget announcement, which is expected Thursday, to see if it includes further austerity measures that could crimp their means. The country is still a long way from achieving its target of substantially increasing non-oil income to balance its budget. King Salman acknowledged Saudi concerns when he told the consultative Shura Council last week that some measures taken by the government “may be painful in the short run but ultimately aim to protect the economy of your country from worse problems.” Saudi Arabia’s fiscal deficit ballooned to a record deficit of $98 billion, or about 16% of gross domestic product, in 2015 due to a sharp drop in the price of oil. Oil sales account for more than two-thirds of government revenue. The budget gap is expected by the International Monetary Fund to narrow this year after the government reduced subsidies, raised fees, introduced new taxes and slashed many government salaries.

Saudis dropped British-made cluster bombs in Yemen, Fallon tells Commons -- The defence secretary was forced to tell the Commons that British-made cluster bombs had been dropped by Saudi Arabia in Yemen, prompting MPs and charities to say that the UK should stop supporting the Gulf state’s military action. Sir Michael Fallon said that a “limited number” of the controversial BL755 bombs had been used by Saudi Arabia, shortly after the Gulf state formally admitted it had deployed the weapons in the Yemeni conflict. Although an international treaty bans the use of cluster bombs, Fallon defended Britain’s support for Saudi Arabia and insisted there was no breach of international law because they were used against “legitimate military targets”. The UK is one of 120 countries to have signed the 2008 Ottawa convention on cluster munitions, banning their use or assistance with their use. Saudi Arabia is not a signatory to the treaty. The munitions pose an indiscriminate risk to civilians because they contain dozens of bomblets that can explode long after they are dropped. Fallon made the statement to the House of Commons after the Guardian revealed he had known for around a month about a government analysis pointing to Saudi having used the UK-made bombs. Shortly before he spoke, Saudi Arabia made a statement overturning previous denials that it had used the weapons and declaring it would not deploy them again. The Scottish National party, which has led calls for the UK to come clean about the use of cluster bombs, said it was a “shameful stain on the UK’s foreign policy and its relationship with Saudi Arabia, as well as a failure by this government to uphold its legal treaty obligations”.

Aramco IPO Could Still Be in U.S. as Kingdom Plays Down Rift - The kingdom is looking at markets from Hong Kong to New York as possible international venues of what could be one of the biggest share sales in history, al-Jubeir told a news conference with U.S. Secretary of State John Kerry in Riyadh on Sunday. The decision is still a “work in progress,” he said. Saudi authorities plan to sell less than 5 percent in Saudi Arabian Oil Co. by 2018 as part of a plan by Deputy Crown Prince Mohammed bin Salman to set up the world’s biggest sovereign wealth fund and help reduce the economy’s reliance on hydrocarbons. In addition to the Sept. 11 law, tensions have arisen over a U.S. decision to block an arms sale to Saudi Arabia because of concerns about rising civilian casualties in the war in Yemen. The kingdom is backing forces of an internationally recognized government against pro-Iranian rebels. Al-Jubeir dismissed speculation that Saudi Arabia would reduce its U.S. investments. “Saudi Arabia has tremendous investments in the United States and we review those investments on a regular basis,” he said. “There are issues associated with risk, but our objective is to increase those investments, we will not decrease them.”

Syrian "Rebels" Attack, Burn Aleppo Evacuation Buses --While the UN condemns Syrian and Russian atrocities in the battle over East Aleppo, which as noted previously was a key victory for the Assad regime in the past week and likely to sway the balance in the ongoing war between regime forces and US-coalition armed rebels, little attention has been paid to the subversive tactics employed by such "moderate rebels" as the al Qaeda linked al-Nusra front. That may change after several buses en route to evacuate the sick and injured from two government-held villages in Syria's Idlib province were attacked and burned by rebels.PHOTOS: Reports coming in that an "unknown rebel group" has attacked buses going to evacuate civilians from Kafraya and Fuah - @Ald_Abapic.twitter.com/7xMPhumeu5 MORE: According to reports, civilians had not yet gotten on the buses. They were on their way to pick them up when the attack happened. As BBC reports, the convoy was travelling to Foah and Kefraya, besieged by rebel fighters. Pro-government forces have been demanding that people be allowed to leave the mainly Shia villages in order for the evacuation of east Aleppo to restart, with thousands of people waiting to leave in desperate conditions, reports say.

Sabotage Of East-Aleppo Evacuation Is Part Of A Plan - The removal of defeated al-Qaeda fighters and their families from east-Aleppo has been on and off for several days now. The agreement between Turkey and Russia on which the evacuation is based stipulates the parallel evacuation of wounded people from the al-Qaeda besieged Shiite village Fu'a and Kafraya in Idleb province. Note that neither the U.S. nor the (partisan) UN were involved in these negotiations. The process was interrupted on Friday after al-Qaeda fighters in east-Aleppo opened fire on evacuating civilians. In parallel buses moving into Fu'a and Kafraya to evacuate the wounded were held up by al-Qaeda aligned groups in the area. Opposition claims that Hizbullah fighters was killing people that were evacuating from east-Aleppo were, according to a BBC producer, lies. Today's evacuations were again sabotaged by al-Qaeda forces:Several buses en route to evacuate the sick and injured from two government-held villages in Syria's Idlib province have been burned by rebels. The convoy was travelling to Foah and Kefraya, besieged by rebel fighters.Pro-government forces are demanding people be allowed to leave the mainly Shia villages in order for the evacuation of east Aleppo to restart.Thousands of people are waiting to leave in desperate conditions, reports say. Al-Qaeda gangs themselves provided video of the bus burning. The bus drivers were likely murdered which pretty much guarantees that no further buses will come or go. I doubt that this is a solely al-Qaeda induced incident. It seems to me that the certain U.S. forces (aka the CIA) are trying to prolong the removal of al-Qaeda from east-Aleppo for their own purpose. Just yesterday even the Washington Post (again) reported on the years long collusion between the CIA and al-Qaeda in Syria: The CIA meanwhile continued to push a program that targeted Russia and its Syrian and Iranian allies — and helped shield Jabhat al-Nusra. There are several "western" groups that want to keep the evacuation stalled to continue their anti-Syrian, anti-Russian and anti-Iran agenda.

Aleppo battle: Hundreds leave Syria city as evacuations resume - BBC News: Evacuations have resumed from east Aleppo, with buses and ambulances leaving rebel areas of the Syrian city. At least 350 people reportedly left rebel enclaves late on Sunday, heading towards other rebel-held territory. Among those to have left is seven-year-old Bana Alabed, who had tweeted about conditions in besieged areas of Aleppo. A separate evacuation of government-controlled parts of Idlib province, besieged by rebels, started early on Monday. Thousands more are waiting to leave east Aleppo amid dire conditions. The UN Security Council is said to have agreed a compromise to allow UN monitoring of the operation. Russia earlier rejected a French-drafted plan to send UN officials to east Aleppo as "a disaster". "We expect to vote unanimously for this text," said US Ambassador to the UN Samantha Power. The Security Council meeting will start at 09:00 (14:00 GMT) in New York. Initial efforts to evacuate the last rebel-held enclaves in the city collapsed on Friday, leaving civilians stranded at various points along the route out without access to food or shelter. Bombardment of east Aleppo has left it virtually without medical facilities.

Iran, Turkey and Russia Meet to Control Syria’s Gas Pipelines - The reason why Iran is at the peace talks is because it’s their gas. The reason why Turkey is a the table is because the pipeline will go through them to EuropeThe Russia hosted the meeting because they want to maintain their hegemony on gas to Europe. The reason why the Arabs aren’t there is because Russia, Syria and Turkey control access to Europe; and because the Arabs tried to overthrow Assad when he granted the pipeline concession to Iran. Anybody in the oil business understands this. Now you do. Any questions ? (We’ve been over all this before)Russia, Iran and Turkey have agreed to help broker a Syrian peace deal after they held talks in Moscow yesterday. The three countries adopted a declaration setting out the principles that needed to be adhered to. Russian Foreign Minister, Sergey Lavrov, said that an agreement had been reached. The priority was to fight terrorism rather than to remove the Syrian regime led by Bashar Al-Assad. The declaration stated that any settlement over Syria had to respect the country’s territorial integrity. Russia’s Minster of Defence, Sergey Shoigu, referring to the principals as the “Moscow Declaration”, said that the trio was confident it would revive the moribund peace process. “Iran, Russia and Turkey are ready to facilitate the drafting of an agreement, which is already being negotiated, between the Syrian government and the opposition, and to become its guarantors,” the declaration said.

U.S. plays down absence from Moscow talks on Syria, says not 'sidelined' | Reuters: The United States on Tuesday sought to downplay its absence from talks on the Syrian conflict among Russia, Iran and Turkey in Moscow, saying it was not a "snub" and did not reflect a decline of U.S. influence in the Middle East. However, President Barack Obama's decision to offer only limited support to moderate rebels has left Washington with little leverage to influence the situation in Syria, especially after Moscow began launching air strikes against rebels fighting President Bashar al-Assad. Although Washington has long been a player in efforts to end the Syria civil war and other Mideast conflicts, the United States was forced to watch from the sidelines as the Syrian government and its allies, including Russia, mounted an assault to pin down the rebels in east Aleppo that culminated in a ceasefire deal. Dennis Ross, a fellow at the Washington Institute for Near East Policy who was an adviser on Iran and the Middle East to both Democratic and Republican administrations, said the United States had made itself "irrelevant" in Syria. "The opposition finds little reason to be responsive to us and Assad. The Russians and Iran know that there is nothing we will do to raise the costs to them of their onslaught against Aleppo and other Syrian cities," Ross said. "Russia, having changed the balance of power on the ground, without regard to civilian consequences, has moved to make itself an arbiter." A spokesman for U.S. Secretary of State John Kerry dismissed suggestions that America's absence from the meeting indicated a change in influence. "The secretary doesn't see this as a snub at all. He sees it as another multilateral effort to try to get a lasting peace in Syria and he welcomes any progress towards that," State Department spokesman John Kirby said on Tuesday.

How The Military Excluded The White House From International Syria Negotiations - The NYT laments today that international negotiations about the situation in Syria now continue without any U.S. participation: Russia, Iran and Turkey Meet for Syria Talks, Excluding U.S. Russia, Iran and Turkey met in Moscow on Tuesday to work toward a political accord to end Syria’s nearly six-year war, leaving the United States on the sidelines as the countries sought to drive the conflict in ways that serve their interests. Secretary of State John Kerry was not invited. Nor was the United Nations consulted. Russia kicked the U.S. out of any further talks about Syria after the U.S. blew a deal which, after long delaying negotiations, Kerry had made with the Russian Foreign Minister Lavrov. In a recent interview Kerry admits that it was opposition from the Pentagon, not Moscow or Damascus, that had blown up his agreement with Russia over Syria:More recently, he has clashed inside the administration with Defense Secretary Ashton Carter. Kerry negotiated an agreement with Russia to share joint military operations, but it fell apart. “Unfortunately we had divisions within our own ranks that made the implementation of that extremely hard to accomplish,” Kerry said. “But I believe in it, I think it can work, could have worked." Kerry's agreement with Russia did not just "fell apart". The Pentagon actively sabotaged it by intentionally and perfidiously attacking the Syrian army. The deal with Russia was made in June. It envisioned coordinated attacks on ISIS and al-Qaeda in Syria, both designated as terrorist under two UN Security Council resolutions which call upon all countries to eradicate them. The Pentagon still did not like it but had been overruled by the White House: Although President Obama ultimately approved the effort after hours of debate, Pentagon officials remain unconvinced. ..“I’m not saying yes or no,” Lt. Gen. Jeffrey L. Harrigian, commander of the United States Air Forces Central Command, told reporters on a video conference call. “It would be premature to say that we’re going to jump right into it.” The CentCom general threatened to not follow the decision his Commander of Chief had taken. He would not have done so without cover from Defense Secretary Ash Carter. Three days later U.S. CentCom Air Forces and allied Danish airplanes attack Syrian army positions near the ISIS besieged city of Deir Ezzor. During 37 air attacks within one hour between 62 and 100 Syrian Arab Army soldiers were killed and many more wounded. They had held a defensive positions on hills overlooking the Deir Ezzor airport. Shortly after the U.S. air attack ISIS forces stormed the hills and have held them since.

Heralding social, financial change, China aims blow at iron rice bowl | Reuters: China has ordered state firms to smash the decades-old system of providing cradle-to-grave welfare support, known as the country's "iron rice bowl". But the order, part of a plan to reduce financial pressure on bloated and heavily indebted state-owned enterprises (SOEs), is likely to be easier said than done as cities navigate the social and financial wrenches the changes will cause. At the heart of soot-covered Pingdingshan in central China is the Pingmei Shenma Group, a state coal conglomerate that dominates the economy, society and air of the heavily polluted city in Henan province. Apart from coal, it has chemicals and construction businesses. But it also has a startling number of other responsibilities. It operates 41 hospitals and 18 schools and provides pensions, subsidized housing for workers, water, heating and power. It even runs a plush retirement home, complete with golf course, for its senior managers. The fate of these facilities, landmarks for the city's residents, is now unclear. If they are not closed down, much of the infrastructure will need to be renovated, which State Council researchers estimate will cost more than 1 trillion yuan ($115 billion) nationwide. Some of Pingdingshan's hospitals already had fewer miners to treat after capacity cuts in coal production.

China’s November Reserve Drain -- China used to manage its currency against the dollar, and now seems to be managing against a basket. But managing a basket peg when the dollar is going up means a controlled depreciation against the dollar—and historically that hasn’t been the easiest thing for any emerging economy to pull off. And China’s ability to sustain its current system of currency management—which has looked similar to a pretty pure basket peg for the last 5 months or so—matters for the world economy. If the basket peg breaks and the yuan floats down, many other currencies will follow—and the dollar will rise to truly nose-bleed levels. Levels that would be expected to lead to large and noticeable job losses in manufacturing sectors in the U.S. and perhaps in Europe. Hence there is good reason to keep close track of the key indicators of China’s foreign currency intervention. The two main indicators I track are now both available for November: The PBOC’s yuan balance sheet shows a $56 billion fall in foreign exchange reserves, and a $52-53 billion fall in all foreign assets (other foreign assets rose slightly). I prefer the broader measure, which captures regulatory reserves that the big banks hold in foreign currency at the PBOC. The FX settlement data—which includes all the state banks but historically has been dominated by the PBOC—shows a smaller $36 billion fall counting the change in the forward position (there is a forward component of FX settlement, but it doesn’t capture offshore yuan—e.g. CNH—forwards). Without the forwards the fall is $27 billion. Both measures show larger sales in November than October, though the settlement data suggests a smaller net outflow from the banking system than the PBOC balance sheet reserves data. Both thus highlight why PBOC was worried enough to tighten its controls at the end of November and start to review outward foreign direct investment a bit more tightly (a step that it arguably should have taken earlier). (Goldman’s numbers are similar).

China’s currency curbs merely ‘temporary’ to stem yuan’s outflow, central bank chief says | South China Morning Post: The Chinese central bank governor Zhou Xiaochuan has described the country’s measures for limiting the yuan’s outflows as a temporary means for preventing capital flight and restoring calm to the currency markets, said the Hong Kong Monetary Authority’s chief executive Norman Chan. “Governor Zhou said the measures are for the short term,” Chan said in Beijing, after leading a visit by the Hong Kong Association of Bankers to the Chinese central bank. “When the market condition becomes stable, the capital flow will be back to normal.” The People’s Bank of China imposed a limit on companies that wanted to remit the yuan, equivalent to 30 per cent of their shareholders’ equity two weekd ago. In addition to the cap, non-financial firms are only allowed to execute any transfers as loans to offshore entities, and these must be supported by valid commercial reasons and must be repaid as per schedule, according to the central bank. Since the new rule took effect, mainland banks had been discouraging customers from any cross-border transactions in their capital accounts, including for overseas debt repayments, despite having set up intra-group yuan cash pools on both sides of the border with China.

US Asian Allies "Worried" By Muted Response To Drone Seizure, As Fears Grow China "Stole Secrets" - While Friday's seizure by China of a US underwater drone may end up as just a tempest in a teapot after China grudgingly agreed to return the US equipment this week after a formal protest by the Pentagon, and Trump's tweet slamming the "unprecedented act", two new concerns have emerged. According to John McCain, China may be poring over a seized underwater drone to unearth secret information about Navy technology, hours after Trump suggested Beijing should “keep it.”Quoted by Bloomberg, McCain, head of the Senate Armed Services Committee, told CNN's State of the Union that “The Chinese are able to do a thing called reverse-engineering, where they are able to - while they hold this drone, able to find out all of the technical information. And some of it is pretty valuable."McCain said China’s seizure was “a gross violation of international law,” echoing the prevailing U.S. response and Trump’s initial blast via a tweet. The president-elect told his 17.5 million Twitter followers: “China steals United States Navy research drone in international waters - rips it out of water and takes it to China in unprecedented act.”His comments highlighted the U.S. political tensions touched off by China’s decision to scoop up the submersible in international waters, which was not even located within the confines of the contested nine-dash line. Assurances from China that the vessel would be returned failed to quiet U.S. critics -- including Trump, who initially denounced the snatch-and-grab move and then reversed himself hours later. Trump said on Twitter late Saturday that “We should tell China that we don’t want the drone they stole back - let them keep it!”

China To Hand Over Seized US Drone "Under These Conditions" --On Saturday morning, the Pentagon was eager to announce that China would return a U.S. Navy underwater drone after its military scooped up the submersible in the South China Sea late this week and sparked a row that drew in President-elect Donald Trump. As previously reported, Pentagon spokesman Peter Cook said that “through direct engagement with Chinese authorities, we have secured an understanding that the Chinese will return the UUV to the United States." In retrospect, the Pentagon may have declared victory too soon. According to the South China Morning Post, China's handover of the drone will come "with conditions", adding that "Beijing is expected to demand the United States scale down its ­surveillance in the South China Sea when it hands back a seized US underwater drone." Beijing would also "seek an expansion in the code for unplanned military encounters in the disputed waters to cover drones like the one seized by a Chinese warship off the Philippine coast near Subic Bay on Thursday." . “Beijing will possibly talk to the US about expanding the code for unplanned encounters at sea to include unmanned underwater vehicles.Currently the code includes a set of standard operational procedures ­designed to minimize the risks of unintended maritime encounters, but it does not have a procedure to deal with underwater drones.China is concerned that despite the US insistence that the drone was used for purely peaceful purposes. its deployment had ulterior motives. Zhang Huang, a professor from the PLA National Defence University, said the unmanned underwater vehicle could be used to gather data on Chinese naval actions, and the navigation details of Chinese submarines, People’s Daily reported.

China Responds To Trump - "We Don't Like The Word 'Steal'" -- While negotiations are ongoing regarding China's return of the undersea US drone that was confiscated by China last week, China has pushed back against U.S. President-elect Donald Trump’s claim that its military stole an American naval drone last week, even as the Philippines called the seizure off its coast, and which took place outside of the contested nine-dash line, “very troubling.” Trump said on Twitter on Saturday that China had “stolen” the drone in an “unprecedented act,” later adding that China should keep it, while on Monday Chinese Ministry of Foreign Affairs spokeswoman Hua Chunying told reporters in Beijing that the unmanned underwater vehicle was removed in a “responsible and professional manner" to protect shipping.Hua then took a swipe at Trump, saying “we don’t like the word ‘steal’ -- the word is absolutely inaccurate,” during the regular daily briefing, adding that China was still negotiating with the U.S. military about the drone’s return. “This is just like you found a thing on the street, and you have to take a look and investigate it to see if the thing belongs to one who wants it back.” The US would beg to differ, considering that theconfiscation took place in an area that was not even contested by China, and was outside the so-called Nine-Dash Line, and in very close proximity to the Philippines: In a follow up statement Monday, Philippine Defense Secretary Delfin Lorenzana said the incident was a matter for China and the U.S. to resolve among themselves. Nonetheless, he said, it was “very troubling” because it occurred within the country’s 200-nautical-mile exclusive economic zone.

Beijing fires trade warning after Trump appoints China hawk - China has warned Donald Trump that “co-operation is the only correct choice” after the US president-elect tapped a China hawk to run a new White House trade policy office.The appointment of Peter Navarro, a campaign adviser, to a formal White House post shocked Chinese officials and scholars who had hoped that Mr Trump would tone down his anti-Beijing rhetoric after assuming office. Mr Navarro, a Harvard-trained economist and University of California Irvine professor, is the author of Death by China and other books that paint the country as America’s most dangerous adversary. “Chinese officials had hoped that, as a businessman, Trump would be open to negotiating deals,” said Zhu Ning, a finance professor at Tsinghua University in Beijing. “But they have been surprised by his decision to appoint such a hawk to a key post.” Adding to rising tensions between the two countries, the US Office of the Trade Representative yesterday put Alibaba, China’s biggest e-commerce platform, back on its “notorious markets” blacklist of companies accused of being involved in peddling fake goods. Hua Chunying, a Chinese foreign ministry spokesperson, said Beijing would monitor the policy positions of the incoming US administration. "As two major powers with broad mutual interests, co-operation is the only correct choice," she said on Thursday. Speaking hours before the appointment of Mr Navarro, which was first reported by the Financial Times, China’s foreign minister Wang Yi told the People’s Daily, the ruling Communist party’s flagship newspaper, that China and the US faced "new, complicated and uncertain factors affecting bilateral relations". He said the world’s two largest economies must respect each other&apos;s "core interests". Cui Fan at the China Society of WTO Studies, a think-tank affiliated with China’s commerce ministry, warned that Beijing would respond to any unilateral action by the incoming Trump administration. “China is preparing itself for US trade actions,” he said. “China will respond with counteractions of its own.”

China’s fast response on Trump’s ‘nuke’ tweet - Shortly after the opinion-article on What would be Trump's biggest mistake, published by the blog, Donald Trump tweeted a very alarming message that made China respond quickly. From china.org : China on Friday called on the United States to take the lead in cutting nuclear weapons after U.S. President-elect Donald Trump used Twitter to propose the expansion of his country's nuclear capabilities. "The world's largest nuclear stockpile country should take the lead in making substantial cuts to its nuclear arsenal so as to create conditions for total elimination of nuclear weapons," foreign ministry spokesperson Hua Chunying said Friday in response to Trump's tweet. Trump tweeted Thursday that the United States must greatly strengthen and expand its nuclear capabilities until such time as the world comes to its senses regarding nukes. Hua said that the United States, as the country with the world's largest nuclear stockpile, bears special and primary responsibilities in nuclear disarmament. China always stands for and advocates complete prohibition and thorough destruction of nuclear weapons, she said. Although China's response could be considered quite mild, the fact that it came very quickly, justifies to some extent what has been estimated in blog's article, that “the Chinese continuously upgrade their military forces, as well as, their nuclear arsenal, partly because of the stupid neocon policy, adopted by Obama, that makes them feel directly threatened and quite nervous.” After all, the Chinese could consider Trump's tweet as a warning against North Korea and even take advantage of the situation. They could calmly agree that nukes should be prohibited for non major powers that could act irresponsibly, showing that the consideration of China as a major power should not be disputed.

Taiwan's president to visit US despite objections from China -- Taiwan’s president is planning to meet members of Congress next month during a stopover visit to the US that will go ahead despite strong Chinese government objections, a senior Taiwanese official has said. China tried to block the visit by President Tsai Ing-wen in the wake of a row over perceived pro-Taiwan comments by the US president-elect, Donald Trump, who also held an unprecedented phone conversation with the Taiwan leader. The visit has caused speculation in Washington and Taiwan that Tsai may meet Trump in person, or members of his transition team, during a nine-day trip that begins on 7 January and includes brief state visits to Honduras, Nicaragua, Guatemala and El Salvador. Speaking to the Taiwan legislature’s foreign and national defence committee, Javier Hou, deputy foreign minister, said Tsai’s planned stopover in the US would be made in accordance with past practice. The foreign ministry was seeking to arrange for Tsai to meet members of the US Senate and House of Representatives, Hou said. The exact locations of the meetings, and the duration of the stopover, have yet to be announced. Trump’s transition HQ is in New York. mTrump infuriated China’s leadership when he spoke to Tsai on the phone and later made separate comments questioning the longstanding “one China” policy, under which the US notionally accepts Beijing’s view that Taiwan is part of China. The US does not officially host Taiwanese leaders.Taiwan has been self-governing and de facto independent since the end of China’s civil war. Beijing regards it as a renegade province.

Aussie Dollar Tanks After China Admits Growth Will Miss 6.5% Target -- With fears mounting over China's debt load sustainability, and amid yet another liquidity crisis, President Xi Jinping appeared to admit that China's economic growth will slow below the government’s 6.5% target. Despite the promise of creating a "modestly prosperous society," Xi warned that China doesn’t need to meet the objective if doing so creates too much risk - a little late for that after trillions of freshly created credit was spewed into zombified firms this year - but at least reality is starting to set in. Last year’s 6.9 percent expansion was the slowest in a quarter century. For this year, the government set a 6.5 percent to 7 percent target range, slower than last year’s goal of about 7 percent. IMF Managing Director Christine Lagarde said earlier in February that the fund strongly recommended that China set a growth target range of 6 percent to 6.5 percent. As Bloomberg reports, too much emphasis on meeting growth objectives is increasing financial risk, according to Huang Yiping, an adviser to the People’s Bank of China. The higher the short-term growth target, the more difficult it will be to rebalance the economy to favor long-term growth, Huang, an economics professor at Peking University, said at an event this week in Beijing. Xi told a meeting of the Communist Party’s financial and economic leading group this week that China doesn’t need to meet the objective if doing so creates too much risk, said the person, who asked not to be named because the discussions were private. Leaders at the gathering agreed that the $11 trillion economy would remain stable with slower growth as long as employment stays firm, the person said. And while Yuan is limping lower (very thin holiday trading), the biggest impact for now is evident in the Aussie Dollar...

More Asian defaults loom in 2017 amid record Korea shipyard debt - As if investors in Asia's troubled corporate bond markets don't have enough to worry about, concern is mounting about whether South Korean shipyards will be able to repay record amounts of debt coming due next year. Yields on bonds of Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co. have shot up this year. The top four Korean shipbuilders have 2.3 trillion won (S$2.8 billion) in notes maturing next year, the most in Bloomberg-compiled data going back to 1997. Some of them may have trouble paying debts without help from the government or group firms, according to HMC Investment Securities Co and NH Investment & Securities Co. The bond slump adds to jitters in Asia's debt market, which has seen Chinese defaults climb to 28 this year from seven in 2015 and delinquencies spreading in Singapore as weak commodity markets took their toll. Hanjin Shipping Co sought bankruptcy protection this year and earnings suffered at Korea's top shipyards including Hyundai Heavy Industries Co and Hyundai Mipo Dockyard Co, amid a slump in oil prices and growing competition from China.

Quiet Since WWII, Japan Begins $44 Billion Re-Militarization To Confront China - The Japanese government has announced it will bolster its coast guard capabilities to defend disputed islands in the East China Sea. China also claims and regularly patrols these islands. The coast guard budget is expected to reach a record of 210 billion yen (approximately $1.8 billion), adding eight new ships and more than 200 law enforcement officials.Japan’s government also just approved a record defense budget of 5.1 trillion yen (approximately $44 billion), with a focus on China and North Korea. The budget is set to include six new submarines equipped with improved sensor technology, which is to be used to deter the challenges presented by the Chinese. The increased funds will also go toward an upgraded missile defense system.Japan has supposedly been investing in a submarine program since the 1950s and analysts consider the Japanese Maritime Self-Defense Force’s submarine fleet to be one of its core strengths.However, it remains to be seen how long Japan will be able to use the term “self-defense” as a justification for advancing its military capabilities. Earlier this month, China accused Japan of interfering with Chinese military aircraft and launching jamming shells, endangering the safety of Chinese aircraft and crew. Japan has had a history of anti-militarism since the end of World War II when it was condemned for its widespread aggression. As Anti-Mediareported last year, “Since the end of World War II, the Japanese constitution, imposed by the United States, has barred military action unless it is deemed necessary for self-defense.” Nevertheless, the Japanese government has moved away from its historical pacifism, passing bills to bolster its military presence. “The new, hotly contested package of 11 security bills [gave] the Japanese military the option to engage in battle to protect their allies, including the United States, even if there is no direct threat to Japan or its people.”

Japan eyes record spending, less new debt in financial year 2017/18 budget: draft | The Fiscal Times: (Reuters) - Japan's government plans an initial budget of a record 97.45 trillion yen ($830 billion) for fiscal 2017, while keeping new debt issuance just below this year's level, a draft of the budget seen by Reuters showed. The planned budget poses a challenge to Prime Minister Shinzo Abe's efforts to streamline spending and proceed with fiscal consolidation to rein in the industrial world's heaviest debt burden. It presents a test of the premier's resolve to achieve a primary budget surplus - excluding debt servicing and new bond sales - by fiscal 2020, which is seen as difficult. The general-account budget spending for the fiscal year to begin on April 1 marks an increase from this year's 96.7 trillion yen, the draft showed, reflecting snowballing social security spending to fund the cost of services for Japan's fast-ageing population. The government aims to approve the fiscal 2017 budget draft at a cabinet meeting on Thursday, along with a small third extra budget for the current fiscal year. Tax revenue for the fiscal 2017 will be forecast at 57.71 trillion yen, up just 110 billion yen from this year, the draft showed.The government plans to sell new bonds worth 34.37 trillion yen, which would be a nine-year low and slightly below this year's initially-planned 34.43 trillion yen. To curb new bond issuance, the government will tap bigger non-tax revenue of 5.37 trillion yen, compared with this fiscal year's 4.69 trillion yen, the draft showed. The government is also set to reduce debt-servicing costs, thanks to rock-bottom interest rates under the Bank of Japan's yield curve control policy.

Japan's Embattled Students Learn to Live Under a Burden of Debt -- Kengo Kyogoku borrows about 122,000 yen ($1,035) per month in addition to a scholarship and a part-time job, because his mother can’t afford to pay his college fees at the prestigious Waseda University in Tokyo. “The amount is huge,” said Kyogoku, a sophomore of communications and computer engineering. “I get depressed when I think about it. I wonder if I would have to pay it all back forever. But I have no choice.” Kyogoku is becoming the norm rather than the exception in Japan, where more than half of college students now need financial aid. Loans were rare in the past as most students came from affluent middle-class families who could afford the fees. Today’s parents inherited the legacy of Japan’s long economic ice-age, with fewer family-wage jobs and lower savings, fueling a sense of generational inequality. While Japan is nowhere near the level of the U.S. -- students there owe some $1.3 trillion in total, compared with about $76 billion in Japan -- the rise of college loans is a triple blow for the country. It puts a bigger financial strain on the shrinking younger generation who already have to shoulder a bigger share of the tax and welfare burden. It dissuades poorer students, who worry that they won’t get the jobs needed to be able to repay the loan. And it increases the strain on a deeply indebted government to boost scholarships to make education affordable.

India to Chair UN Group on ‘Killer Robots’, Open New Page on Arms Control Diplomacy -- On Friday, India was selected as the chair of the first group of governmental experts (GGE) constituted to deliberate the issue of Lethal Autonomous Weapons Systems (LAWS) and their impact on international security. New Delhi’s role will be crucial to conceiving and articulating the international regime on LAWS – derisively termed “killer robots” technology. If the decision to create a GGE reflects widespread concern that an elite club of countries will deploy and proliferate advanced technologies without clear rules of engagement, India’s appointment as chair – Amandeep Gill, its permanent representative to the Conference on Disarmament (CD) will assume this role – means the country needs to clarify its own thinking and get all stakeholders across different branches of government on the same page. The field is split wide open between developing countries like Egypt, Mexico and Cuba seeking a ban on the use of LAWS, and major powers like the US and Russia on the other, testing and in some cases, deploying them with varying degrees of success. India enjoys credibility as a contracting party to the CCW and is among the few delegations at the CD consulted on emerging plurilateral initiatives, which is likely to have contributed to its selection as the GGE chair. That the Indian line on disarmament, reporting requirements, export controls and proliferation is predictable and consistent with state practice would have also inspired confidence among CCW member states. The Indian representative is a veteran arms control negotiator, and until recently, headed the disarmament and international security affairs division (DISA) of the foreign affairs ministry in New Delhi.

Why millions of Indian workers just staged one of the biggest labor strikes in history -- Earlier this month, tens of millions of Indian workers staged a one-day general strike that unions billed as the biggest work stoppage in human history.By the unions’ count, 180 million workers stayed home to demand a slew of changes to labor laws, including establishing a $270 monthly minimum wage for unskilled laborers and ensuring social security for every worker.The 24-hour strike cost the Indian economy up to $2.7 billion, by one estimate, and affected electricity, mining, telecommunications, banking and insurance operations in several states. It was the latest salvo in an escalating battle between India’s leading public-sector trade unions and Prime Minister Narendra Modi’s government, which they accuse of pursuing a pro-business agenda while ignoring workers’ rights.The unions represent several million workers in a country of 1.3 billion people. But the changes they are seeking would have the greatest effect on those who toil in India’s vast informal economy, which by some measures includes 90% of the workforce.These housekeepers, deliverymen, sidewalk vendors, pushcart drivers, bricklayers and others account for roughly half of what has become the world’s fastest-growing major economy. Yet they lack health benefits, pensions and basic labor protections, including the ability to organize. And because there is no enforcement of minimum wage laws at the informal level, these workers struggle the most when prices rise. In Mumbai, India’s financial hub, domestic servants sometimesleave jobs for raises of as little as $15 a month.

Is the RBI Getting Its Math on New Notes Wrong? - Either the Reserve Bank of India (RBI) is uncharacteristically cavalier with the demonetisation-related figures it has given out periodically since November 8 or, more worryingly, its number crunchers are getting their math mixed up. For the numbers that the apex bank has put out so far do not add up and, indeed, lead to two inevitable conclusions. One: There is an apparent shortfall of anywhere between Rs 5,000 crore and Rs 56,000 crore in terms of the new currency notes it says it has pumped back into the system. Two: Even by the most optimistic of calculations, it appears that less than 2% of the crucial Rs 500 demonetised notes have been returned to the banking system, lending credence to stories of problems at printing presses. To tackle issue number one first: On December 7, during the monetary policy press conference, the deputy governor of the RBI, R. Gandhi, informed the media that a total of Rs 4 trillion had been disbursed to the public in new currency notes so far. Of this amount, Rs 1.06 trillion was in smaller denomination currency notes while the rest – Rs 2.94 trillion – was by way of high-denomination notes of Rs 2,000 and Rs 500. The break-up of the lower currency notes – 19.1 billion in number – was as follows: 8.5 billion pieces of Rs 100 (amounting to Rs 85,000 crore), 1.8 billion pieces of Rs 50 (Rs 9,000 crore), 3.1 billion pieces of Rs 20 (Rs 6,200 crore) and 5.7 billion pieces of Rs 10 (Rs 5,700). The total value of small notes issued till December 6 was thus Rs 1.06 trillion (Rs 1.06 lakh crore).

How demonetisation has hit book sales (and what might happen at next month’s book fairs): In this season of frenetic literary activity, featuring book launches, literature festivals and book fairs, demonetisation has stomped in as the grinch who stole Christmas. Everyone knows the effects of Prime Minister Narendra Modi’s move to scrap high value notes overnight. One of the lesser-known victims is the business of books. Publishers, distributers and booksellers are all feeling the pinch after over a month of dealing with the cash crunch. A reading of the latest Nielsen Bookscan ratings is all you need to figure the scale of loss in publishing, a sales team executive from Penguin-Random House tells Scroll.in. “As per the analysis of last four weeks, the total consumer market is down by 35% year-on-year,” he said. Other publishers are observing even steeper drops. “Distributors have reported a 50% decline in sales in the first four weeks after demonetisation, though things seem to be looking up a bit now,” said Yogesh Sharma, VP, Sales and Marketing, Bloomsbury India. “But our sales to distributors for books that sell regularly are down by 20% so far in December.” The impact is deeper in Tier 2 and Tier 3 towns, where transactions by credit or debit cards and digital wallets are not popular, says Arup Bose, Publisher, Srishti Publishers & Distributors.Books in regional languages, which depend more on cash transactions at every level of production, have been hit worse. Tridib Chatterjee, honorary general secretary, Publishers and Booksellers Guild, Kolkata, has said to news agencies that if the dismal turnout at smaller book fairs seen in the last couple of weeks is anything to go by, he is worried about the production of books, reprinting, and, more urgently, the mood and sales at the upcoming Kolkata Book Fair scheduled for late January. “Publishers are likely to bring out only one-fifth of their titles,” he said.

Demonetisation brings manufacturing to a halt - About 30,000 units manufacturing auto mobile spare parts and about the same number of agro based industrial units have shut shop post-demonetisation with orders drying up. About 1.5 lakh MSME units (all segments) lined up along Jeedimetla, Balanagar, Shahpur, Maheswaram, Adibatla, Quthbullapur, Dulapally, Kukatpally and Cherlapally are on verge of shutting down operations after facing huge losses over the past one month. Also small players in retail textile, food processing and plastic industry are also bearing the brunt of demonetisation. Most of the units manufacturing auto mobile spare parts in the city cater to show-rooms and shops within the city. While the units are not ancillary units that supply to any mother companies but they manufacture spares that work equally well as original parts. Since the `micro' industry completely runs on cash, be it placing of orders, transportation, payment to workers or purchase of raw materials, units have seen between 50 to 70% loss of production over the month. "I am unable to pay to my labourers as none of them have bank accounts. They are refusing to come to work, forcing me to suspend operations," said Shaik Hussain, accessory manufacturing unit owner from Balanagar. Despite the announcement that banks can give upto Rs 50,000 to commercial establishments, banks are not giving that amount. "The worst hit among the lot are the micro units with turnover of Rs 10 lakh to Rs 50 lakh. Also MSMEs across segments are hit badly. In most of these units, the workers are hired on a daily basis,"

Despite the comparisons, India's Aadhaar project is nothing like America's Social Security Number: From food rations to marriage certificates, entrance exams to train ticket concessions, mobile phone cards to banking, Indians are now being asked to produce a 12-digit Aadhaar number to access both government and private sector services. This number is connected to their fingerprint and iris scans that are stored in a centralised database. As of September 2016, this database held the demographic and biometric information of more than 105 crore people – more than 80% of India’s population, and three times the population of the United States. India’s Unique Identification project is the world’s largest biometrics-based identity programme. Initially, the project had a limited aim – to stop theft and pilferage from India’s social welfare programmes by correctly identifying the beneficiaries using their biometrics. But now, the use of Aadhaar is expanding into newer areas, including business applications. As the uses of Aadhaar proliferate, what are the rewards and risks? Over the next week, a special series on Scroll.in will take a closer look at the many dimensions of Aadhaar, from its use for social welfare, to its expansion in the private sector, to concerns over privacy and data violations. First, a quick comparison with the Social Security Number of the United States. The nine-digit number, which is used widely by government agencies in the US, is seemingly as ubiquitous as Aadhaar. It is often used as an example of an advance economy successfully doing something similar to India’s unique identity project. But there are important differences between the two, starting with the fact that the Social Security Number is, well, not an identity number.

An Apple Manufacturing Plant in India? Don’t Tell Trump - While Donald Trump is urging the American technology industry to shift manufacturing efforts to U.S. shores, it appears Apple didn’t get the memo: it’s apparently considering setting up a production plant in India. The Wall Street Journal reports that Apple is in discussions with the Indian government about building products in the country. According to the newspaper’s sources, the company has stated its desire to manufacture there, but is seeking “financial incentives to move ahead.” The plan makes sense. Apple doesn’t have much in the way of market penetration in India, partly because it doesn’t have its own stores there. But regulations in the country prevent foreign companies from setting up shop unless they purchase 30 percent of materials for manufacturing domestically. India isn’t geared up for delivering iPhone parts, so setting up a plant would solve the problem. A modest facility—likely, as it would surely be more an assembly facility rather than anything else—would help Apple grow in India as it has in China, then. But the U.S. economy would see little benefit beyond Apple's stock price given its history of squirrelling money away off-shore rather than bringing it back to America and paying tax. Even if Apple’s Indian manufacturing outfit were small, though, the president-elect would not be pleased. Trump has repeatedly called for U.S. technology companies to manufacture products on American soil. And he’s singled Apple out, saying that he will get it “to start making their computers and their iPhones on our land, not in China.”

Australia could scrap the $100 note - Australia looks set to follow in the footsteps of Venezuela and India by abolishing the country's highest-denomination banknote in a bid to crack down on the "black economy".Speaking to ABC radio on Wednesday, Revenue and Financial Services Minister Kelly O'Dwyer flagged a review of the $100 note and cash payments over certain limits as the government looks to recoup billions in unpaid tax.Monday's midyear budget update will include the appointment of former KPMG global chairman Michael Andrew to oversee a black economy taskforce. The black economy accounts for 1.5 per cent of GDP, given many cash payments are untaxed.O'Dwyer told the ABC not only is the lost revenue owed to the Australian people for schools and hospitals, but it's also critical for those who do the right thing and pay tax."The whole point of this crackdown on the black economy is to make sure we close down any potential loopholes," she said.Despite the broad use of electronic forms of payment, O'Dwyer warned there are three times as many $100 notes in circulation than $5 notes. "It does beg the question, 'Why?'" she said. There are currently 300 million $100 notes in circulation, and 92 per cent of all currency by value is in $50 and $100 notes.

TaxCast on Ownership Avoidance and the Great Escape (podcast) From Tax Justice Network’s December 20 Taxcast In trusts we trust? We look at the new game in town: beneficial ownership avoidance, the booming industry in alternative escape vehicles from public registers and why we must shine the spotlight on all of them. Plus: we discuss two big stories we think will define 2017: the race to the bottom between nations on tax aka a transfer of wealth to the corporate community, and how the world’s biggest havens are increasingly having to account for the devastating effect their tax and/or financial secrecy policies are having on human rights around the world… Featuring: Lawyer Paul Beckett of cyber-intelligance agency Synceritas, journalist and financial sleuth Richard Smith of Naked Capitalism, and John Christensen of the Tax Justice Network. Produced and presented for the Tax Justice Network by Naomi Fowler. “What has happened worldwide is a new phenomenon which I have called beneficial ownership avoidance…the danger is that if one of these structures is established by someone who is less than scrupulous the client going forward can say when asked, do you have an interest under a trust anywhere? The answer is no. Do you own this particular asset? No.” ~Paul Beckett“There’s been a boom in NZ trusts and the suspicion has to be that there’s plenty more oligarchs and the like using these structures to obfuscate ownership.” ~Richard Smith“The race to bottom between nations on tax is a game for losers…this does nothing at all to improve productivity or growth or the quality of economics anywhere, it quite simply is a transfer of wealth to the corporate community”

South Sudan on brink of genocide – one more victim of western policies in Africa | Defend Democracy Press: Human rights organizations, genocide watch groups and the UN secretary-general are warning of a potential genocide in South Sudan, the world’s youngest country, and asking the UN Security Council and regional leaders to take action. “All of the early warning signals for mass atrocities in South Sudan are there,” a special commission to South Sudan reported at a UN Human Rights Council meeting December 14. UN Warns of Potential Genocide in South Sudan Amid Renewed Violence The five-year-old nation remains in turmoil despite the nominal end of a three-year civil war in August 2015. The war, which began as a political conflict between the country’s president and then-vice president, members of different ethnic groups, ended up taking shape along ethnic lines, pitting the country’s two largest ethnic groups, the Dinka and the Nuer, against each other, and exacerbating tensions among others. “There is an increase in polarized ethnic identities, a culture of denial, and in some areas, systematic violations that have been planned, South Sudan commission chair, Yasmin Sooka said in a statement. “The Commission’s recent visit to South Sudan suggests that a steady process of ethnic cleansing is already underway in some parts of the country. We don’t use that expression lightly. Targeted displacement along ethnic lines is taking place through killing, abductions, rape, looting and burning of homes.”Sooka’s statement described levels of rape in the country as “epic,” including statistics showing 70% of women in civilian protection camps had been sexually assaulted, widespread and severe food insecurity, targeted robberies and killings by soldiers and police against different ethnic groups and ethnically determined landgrabs and job dismissals, all in a context of uncontrolled inflation and a collapse of basic services.

Brazilian President Temer Signs Constitutional Amendment Imposing 20 Years of Austerity: It's The Real News Network. I'm Sharmini Peries, coming to you from Baltimore. On Thursday, Brazil's President, Michel Temer, signed a constitutional amendment that will limit fiscal spending over the next 20 years. The measure is highly controversial and has sparked protests throughout the country over the last few weeks. Critics say that the amendment commits Brazil to austerity for the next 20 years by limiting spending regardless of population or GDP growth. Spending increases are only connected to inflation growth. According to a recent poll, only 24% of the population supported and 60% are opposed to it. Many also view President Temer as being illegitimate since he came into office through a legislative coup. That was when Workers Party President Dilma Rousseff was ousted on accusations of having committed administrative irregularities. Joining us now from London to discuss this is Alfredo Saad-Filho. Alfredo is a Professor of Political Economy at the School of Oriental and African Studies, the University of London, and was a Senior Economic Affairs Officer at the United Nations Conference on Trade and Development. Alfredo, thank you so much for joining us today.

Canada's natural resource wealth, 2015 -The value of Canada’s natural resource assets stood at $287 billion in 2015, down 73% from 2014, largely due to lower energy prices. This decrease followed a 28% increase in 2014.Timber resources accounted for 55% of the value of all natural resource assets in 2015, followed by minerals (26%) and energy resources (19%).The value of energy resource assets, which consist of reserves of coal, crude bitumen, crude oil and natural gas, decreased by 93% in 2015 to $56 billion, following a 49% increase in 2014. The large decline in 2015 came primarily from lower crude bitumen prices. As a result, this also increased the shares of mineral and timber resources of total natural resource wealth.The value of mineral assets fell 38% to $74 billion in 2015 following a 24% decline in 2014. In general, lower commodity prices, combined with stable labour and energy costs compared with the previous year, contributed to the decline. The decrease in iron ore values made the largest contribution to the decline, although decreases in potash, copper-zinc and nickel-copper values were also major contributors.The value of timber assets declined by 1% in 2015, following a 9% increase in 2014.

Manufacturing output fell 2 percent -- the biggest decline since 2013 -- with durable and non-durable goods down 2.1 percent and 2 percent respectively.Factory output has been persistently weak, falling 0.2 percent since October of last year.

Amid Finger Pointing at Russia, US Brings Tanks Back to Cold War Depot - As President Barack Obama vows that the United States will take "action" in response to the allegations that Russia interfered with the November election, the U.S. army has started to bring tanks back to a Cold War site in the Netherlands as a show of its "commitment to deterrence in Europe."The U.S. and Dutch military reopened the Eygelshoven site on Thursday. It will contain "strategically prepositioned critical war stock" including M1 Abrams Tanks and M109 Paladin Self-Propelled Howitzers."Three years ago, the last American tank left Europe; we all wanted Russia to be our partner," said Lt. Gen. Ben Hodges, head of U.S. Army Europe. "My country is bringing tanks back," and "[w]e are signaling our commitment and demonstrating the ability to prepare," he said."That is what Eygelshoven represents. This is the manifestation of 28 nations committed to the security of each other," he said.Added Dutch Gen. Tom Middendorp, chief defense staff of the Royal Netherlands Army: "We want to make sure we are sending a clear signal to Russia that we will not accept any violation of NATO's territorial integrity." U.S. Congress earlier this month passed the National Defense Authorization Act, or NDAA, which, as the Wall Street Journal noted, "approved a $3.4 billion spending plan to boost European defenses including reopening or creating five equipment-storage sites in the Netherlands, Poland, Belgium, and two locations in Germany."

US Army Deploys Tanks To Europe Ratcheting Up Tensions With Russia --On December 16, US tanks and armor vehicles arrived in the Netherlands to be deployed in a storage depot located in the province of Limburg. The facility, the former Eygelshoven military base near Kerkrade, will be used to keep and maintain tanks, armored vehicles and heavy artillery pieces for a US armored brigade combat team. In January, the US Army in Europe is due to deploy a total of 4,000 American troops and around 2,000 military vehicles on a rotational basis to Poland, Romania, Bulgaria and the Baltic nations. NATO forces will move to the Baltic States in early spring. In an overtly provocative move, an American battalion will be stationed in Poland near the border with Kaliningrad, Russia’s Baltic enclave. The US Army is implementing the annual defense authorization act which approved a $3.4 billion spending plan to boost NATO forces, including reopening or creating five equipment-storage sites in the Netherlands, Poland, Belgium and two locations in Germany. In September, the US Army began to assemble more Army Prepositioned Stocks (APS) for permanent storage in Europe. The additional combat equipment will give the Army the option for another heavy armored brigade. Presently, it has only two light brigades in Europe: 173rd Airborne Brigade and the 2nd Stryker Cavalry Regiment. The US military has over 62,000 permanently assigned service members in Europe.

Russian ambassador to Turkey shot dead by police officer in Ankara gallery - The Russian ambassador to Turkey has been shot dead by a police officer who shouted “Don’t forget Aleppo” as he pulled the trigger. The chilling attack on Monday evening, which was captured on video, appeared to be a backlash against Russian military involvement in the Syrian civil war. Andrei Karlov was attacked at the opening of an art exhibition in Ankara by a man believed to be an off-duty Turkish police officer. Karlov was several minutes into a speech when he was shot. Footage of the attack showed a man dressed in a suit and tie standing calmly behind the ambassador. He then pulled out a gun, shouted “Allahu Akbar” and fired at least eight shots. After firing at the ambassador, the man shouted in Turkish: “Don’t forget Aleppo. Don’t forget Syria. Unless our towns are secure, you won’t enjoy security. Only death can take me from here. Everyone who is involved in this suffering will pay a price.” He also shouted in Arabic: “We are the one who pledged allegiance to Muhammad, to wage jihad.” The Russian president, Vladimir Putin, called the killing a “provocation” aimed at sabotaging a rapprochement between Moscow and Ankara and attempts to resolve the conflict in Syria. “The crime that was committed is without doubt a provocation aimed at disrupting the normalisation of Russian-Turkish relations and disrupting the peace process in Syria that is being actively advanced by Russia, Turkey and Iran,” he said in televised comments. Putin said: “There can be only one answer to this - stepping up the fight against terrorism, and the bandits will feel this.” Putin said that Russian officials would be dispatched to Ankara to investigate the killing. “We have to know who directed the hand of the killer,” he said.

Turkish Pro-Government Media Blames US, CIA For Assassination Of Russian Ambassador - Following yesterday's Ankara tragedy in which a 22-year-old Turkish off-duty police officers assassinated the Russian ambassador, Turkey found itself in a scapegoat vacuum, having nobody to blame: after all, following this summer's failed "coup", Erdogan allegedly purged all forces who were hostile to his administration, which would suggest the police officer was one of "Erdogan's people." That however quickly changed when this morning Turkey's pro-government media outlets and journalists promptly cast the blame for the cold-blooded murder on the US, and the faith-based Gulen movement whose cleric Fetullah Gulen has been granted refuge in rural Pennsylvania, for the murder of the Russian ambassador to Turkey by a police officer on Monday evening. The gunman, Mevlut Mert Altintas, chanted Islamist slogans also used by radical terrorist organization the Al Nusra Front after he shot Karlov to death at an art gallery in Ankara. Yet, many pro-government newspapers and columnists did not hesitate to label the gunman a member of “FETÖ,” a term the government coined to call the Gulen movement a terrorist organization, and also talked about the US role in the murder from their front pages on Tuesday. The pro-government Yeni Safak newspaper announced the murder of the ambassador with a headline saying, “Great sabotage.” The daily said “The pro-FETÖ assassins of the CIA have been mobilized” in order to ruin Turkish-Russian relations. “It is stated that the US has begun open attacks [against Turkey] over FETÖ,” said the daily.

Italy Paves Way for a $21 Billion Rescue Plan for Ailing Banks - The Italian government cleared the way for the potential rescue of lenders, including Banca Monte dei Paschi di Siena SpA, by seeking permission from parliament to increase the nation’s public debt by as much as 20 billion euros ($21 billion). Monte dei Paschi Chief Executive Officer Marco Morelli is scampering to find investors to back a private 5 billion-euro capital increase, which also includes a share sale and a debt-for-equity swap. Should his efforts fail, Prime Minister Paolo Gentiloni’s cabinet has laid the groundwork for a state-sponsored cash injection with the possible sale of bonds. New on the job, Gentiloni was at pains to describe the steps toward state aid as a “precautionary” measure in a news conference at the end of the cabinet meeting in Rome. At 2.23 trillion euros, Italy’s public debt is already the second-biggest after Greece as a percentage of gross domestic product and the fragility of the country’s lenders coupled with recent political instability has put financial markets on edge. Finance Minister Pier Carlo Padoan, who kept his job after Matteo Renzi resigned as premier, said the impact on the debt would a “one-off, temporary” and said he was “frankly perplexed” by criticism that the measures would be financed by tax payers.

Italy Seeks Authorization To Raise National Debt To Fund Bank Bailouts, As BMPS Rescue Plan In Jeopardy - While Italy scrambles to conclude a private sector rescue of ailing Monte Paschi, which hopes to raise €5 billion in the form a share sale to anchor and retail investors, while at the same time the bank is underoing a debt for equity swap, moments ago Reuters reported that Italy's cabinet will meet later on Monday to authorise an increase to the national debt to cover the cost of saving Monte dei Paschi di Siena, should a public bailout be unavoidable, as well as other ailing banks, government sources said cited by Reuters. As reported yesterday, Monte dei Paschi has launched a 5-billion-euro (4.2 billion pounds) capital increase and must raise the money by the end of the year or face being wound down. If it cannot find takers in the private sector, the government will be forced to step in. Sources told Reuters last week that the government was ready to pump €15 billion euros - just under one percentage point of gross domestic product - into Monte dei Paschi and other ailing banks. Before it can do that, it needs authorisation to lift national debt levels, which it will do tonight at 7:30pm CET when the cabinet will meet with the Italian parliament to discuss increasing Italy's public debt to fund bank bailouts. Meanwhile, after having soared in the early part of December following the failed Renzi referendum, Italian banks slid today on concerns over the successful conclusion of the Monte Paschi bailout.

Paschi Said Failing to Lure Investors as State Readies Aid - Banca Monte dei Paschi di Siena SpA will probably fail in its effort to raise 5 billion euros ($5.2 billion) of funds from money managers and individuals as potential anchor investors balk and few bondholders agree to swap their notes into stock, said people with knowledge of the matter. Qatar’s sovereign-wealth fund, which had considered an investment, hasn’t yet committed to buying shares, while a second debt-for-equity swap has raised about 500 million euros through Tuesday, a day before it expires, said the people, who asked not to be identified because the matter is private. Other institutions that were considering buying shares have indicated that they would put funds in the troubled bank only if it’s able to raise 2 billion euros from the swap and 1 billion euros from cornerstone investors, one person said. Monte Paschi will probably make a final decision on the share sale once the offer period ends on Thursday, said the person. A spokesman for the bank declined to comment. The Italian government late Monday moved closer to a potential rescue of lenders including Monte Paschi by seeking permission from parliament to increase the nation’s public debt by as much as 20 billion euros. The plan is aimed at providing a backstop to the banking system “through public guarantees in order to restore their short- and medium-term lending ability,” Finance Minister Pier Carlo Padoan said following a cabinet meeting Monday night.

Saving Italy’s Banks Means Missing Public Debt Target Again -- Italian governments may come and go, but the debts they have to deal with just keep mounting.Next year will probably bring more of the same with a new reason: the possible last-ditch rescue of Banca Monte dei Paschi di Siena SpA, the country’s third-biggest bank, as well as other troubled banks. At a cabinet meeting on Tuesday, Prime Minister Paolo Gentiloni decided to ask the Rome-based parliament to approve up to 20 billion euros ($21 billion) in additional financing that could be used as a precautionary fund to rescue troubled lenders. “Such an addition inevitably means that the reduction of the debt ratio would be delayed further," said Loredana Federico, an economist at UniCredit Bank AG in Milan. In UniCredit’s 2017 Outlook report, Federico had forecast the debt ratio to gross domestic product would rise next year to 133.2 percent. She said in an interview that she now sees it 1 percentage point higher, exceeding 134 percent. At 2.22 trillion euros at the end of October, Italy’s public debt is the euro region’s largest in absolute terms and the second-biggest after Greece as a percentage of GDP. A growing debt-to-GDP ratio may make it harder for Italy to put the economy on a steady upward path. An increase in 2017 would mark the 10th straight annual rise. Under Matteo Renzi, Gentiloni’s predecessor, the government had committed to finally cut the load in 2017, a target already missed this year.

Exclusive: Investors snub Italian bank Monte Paschi's share offer - sources | Reuters: Monte dei Paschi di Siena has all but failed to pull off a last-ditch rescue plan and a state bailout for the ailing Italian bank now looks inevitable, sources said on Wednesday. Confirming an earlier Reuters report, the bank said late on Wednesday it had failed to secure an anchor investor for its offer of new shares, which has just hours left to run. Two sources close to the matter told Reuters this had in turn dissuaded other institutional investors from supporting this part of the 5 billion euros ($5.2 billion) rescue plan. The bank needs to raise the money in the share offer and a separate debt-for-equity swap by the end of this month to avert being wound down by regulators, a move that would rock confidence in the euro zone's fourth-largest banking sector. The Italian government is expected to step in this week, possibly as early as Thursday, to bail out the Tuscan lender, Italy's third biggest bank and the world's oldest. Monte dei Paschi had pinned its hopes on Qatar's sovereign wealth fund investing 1 billion euros in its cash call, but that option is no longer on the table, said the sources familiar with the progress of the rescue plan. "The idea that Qatar could be an anchor investor has vanished and without an anchor investor there is no demand from anyone else," one source said.

Monte Paschi Said Headed for Nationalization After Sale Failure --Banca Monte dei Paschi di Siena SpA will probably fail to lure sufficient demand for a 5 billion-euro ($5.2 billion) capital increase, leading to what would be the country’s biggest bank nationalization in decades, said people with knowledge of the matter. The Italian cabinet may meet as early as Thursday evening to approve a bank decree that will include measures to cover any funds missing in Monte Paschi’s recapitalization, a senior official said, asking not to be identified before the decree is presented to cabinet.No anchor investor has shown interest in the stock sale, the Siena-based company said in a statement late Wednesday. Two debt-for-equity swap offers will raise about 2 billion euros, with investors converting bonds for about 2.5 billion euros, the lender said. The interest is probably insufficient to pull the deal off, said the people, who asked not to be identified before a final assessment.“Nationalization after five years of restructuring, two state bailouts and 8 billion euros of wasted private funds is at the very least a missed opportunity, if not an outright failure of both the private and public sector,” said Fabrizio Bernardi, an analyst at Fidentiis Equities.Monte Paschi Chief Executive Officer Marco Morelli had crisscrossed the globe looking for investors to back the bank’s reorganization plan, which included a share sale, a debt-for-equity swap and the sale of 28 billion worth of soured loans. A nationalization of Monte Paschi, the biggest in Italy since the 1930s, could be followed by rescues for lenders including Veneto Banca and Banca Popolare di Vicenza as part of a 20 billion-euro government package. The government would back lenders that fail to raise money privately, using a fund that would intervene if needed, and the banks will not be named specifically in the text of the decree, the official said. The European Commission has approved the plan, the official said, adding that shareholders will be hit, but the aim is to limit losses for stockholders and bondholders.

Italy Announces Sketchy Plan to Bail Out Monte dei Paschi - Yves Smith - To no one’s surprise, the private sector effort to rescue Italy’s third largest bank, Monte dei Paschi, officially failed yesterday. Recognizing an end game was nigh, the Italian government announced that it would raise its debt levels by up to €20 billion to shore up failing banks.It does not take much in the way of mathematical skills to see that €20 billion will not go very far in plugging a hole of €360 billion in bad loans, particularly given that the total equity of Italian banks is only €225 billion. In fairness, not all of the loans are total losers; many would be viable if restructured. However, €200 billion are non-performing. So it’s probably generous (to the Italian government) to assume that writedowns would be at least half the total amount, or €180 billion. So why were some sites, like Business Insider, saying that an Italian rescue might cost “as much as” €52 billion? That’s a lot lower than the hole in the banks’ balance sheets. That is because the bail in rules require 80% of the losses come out of the hides of equity holders and subordinated creditors; the state provides the rest. However, the bail-in rules also stipulate that a bank not be failing.2 Keep in mind that Monte dei Paschi (and no doubt some other Italian banks) are so far gone that they should be resolved, as in nationalized, as the 5 Star Movement is demanding. But the Italian government can’t begin to pretend it can borrow enough under Eurozone rules to provide that level of funding, and the Germans have been incredibly hard-nosed about cutting Italy any slack with respect to its banking mess. As the very thin press details of the Monte dei Paschi bailout make clear, it’s going to be done at least to some degree in conformity with the new bank bailout rules, which are actually “bail-in” rules. Equity holders, and then creditors are to be wiped out. The wee problem is that depositors are also creditors, and in the first application of a bail-in, in Cyprus, deposits over a certain size took haircuts. While no one yet expects depositors to take losses, the wee problem in Italy is that wobbly banks took advantage of often unsophisticated borrowers and sold them subordinated debt products, telling them they were similar to deposits. The Bank of Italy chose to ignore this deception, which started while Mario Draghi was governor. Some have argued that over 80% of the investors in these debt products were well off, so they can afford to take losses. But that still means a meaningful proportion weren’t affluent. So while details of how the Monte dei Paschi rescue are scarce, a few things seem clear:

The Italian government is leaning towards a less punitive bail in.

Any “wronged depositor reimbursement program” may nevertheless leave many in distress.

The slow motion bank run in Italy will only get worse.

The €20 billion to help with rescues is yet another kick-the-can-down-the-road non-remedy.

Italy Sets Up Fund to Help Troubled Banks - WSJ: Italy’s government has set up a backstop fund to shore up troubled banks, setting the stage for the rescue of troubled Italian lender Banca Monte dei Paschi di Siena SpA. At a cabinet meeting in the early hours of Friday, the government of Prime Minister Paolo Gentiloni approved the creation of a €20 billion ($20.9 billion) fund to help troubled banks. Shortly afterward, Monte dei Paschi said it will apply to tap this fund for fresh equity to shore up its balance sheet. Following the move, the Italian market regulator suspended trading in Monte dei Paschi’s ordinary shares, related derivatives and 10 types of bonds for the entirety of Friday’s session. The government’s decision came just hours after the Tuscan bank declared that a last-ditch effort to raise capital from private investors had failed. The bank, Italy’s No. 3 lender, attempted to raise €5 billion to stay afloat and avert a government bailout. The government said that if a bank taps the newly created fund, its outstanding junior bonds will be forcibly converted into shares. European rules on bank rescues require that investors suffer at least some losses. However, under the terms attached to the Italian government’s new fund, the losses suffered by holders of Monte dei Paschi’s junior bonds appear to be fairly limited.The government said that for the Tuscan bank, some junior bonds held mainly by institutional investors will take a 25% haircut on their face value when converted into shares when the bank taps the fund. In the case of those held by retail investors, however, their bond holdings will also be forcibly converted into shares, but at their full value. MPS will swap the shares obtained by retail investors from the forced conversion of their junior bonds with senior bonds and then the government will buy those shares from the bank.

Italy approves bailout for Monte dei Paschi - BBC News: Italy's cabinet has approved a state-bailout for the country's third-largest bank, Monte dei Paschi di Siena. Prime Minister Paolo Gentiloni said his government had authorised a €20bn ($21bn; £17.9bn) fund to support Italy's embattled banking sector. The announcement came after Monte dei Paschi failed to raise €5bn from private investors. The Italian bank said it would request a capital injection from the state to stay afloat. Under new EU rules on bank bailouts, the bailout will entail a forced conversion of the bank's junior bonds - many of which are held by small investors - into shares. A state bailout risks losses for thousands of ordinary retail investors, who are estimated to hold some €2bn of Monte dei Paschi's bonds. However, the government will need to stick to new European Union rules designed to stop tax payers bearing the brunt of supporting weak banks. Italy's economy minister, Pier Carlo Padoan, said: ''This intervention will guarantee the capital requirement of Monte Paschi and will therefore allow the bank to proceed with its business plan, which European authorities will need to approve. "It will be the third Italian bank which finally will return to operate at full throttle in support of the Italian economy and with the confidence of its savers and employees.'' The Italian parliament had already authorised the government to create a fund to prop up the banking sector.

Spanish Banks Ordered to Repay Customers Over Unfair Mortgages - — Europe’s highest court ruled on Wednesday that customers of banks in Spain can reclaim billions of euros because lenders did not pass on savings from interest rate cuts on variable-rate mortgages, sending shares in several of the country’s top lenders crashing. The ruling centered on the use of a “floor clause” in Spanish mortgage contracts during the aftermath of the global financial crisis. Such agreements meant that the interest rate on an adjustable-rate mortgage was always held above a predetermined level, regardless of how low central bank rates fell. Spain’s lenders began to use the clauses in 2009, after the global financial crisis pushed central banks around the world to slash interest rates. That helped preserve bank profit margins but failed to pass rate cuts on to customers beyond a certain level. In 2013, Spain’s supreme court ruled that such deals were illegal, in part because the country’s banks did not adequately explain them to customers. The court did not, however, penalize lenders retroactively. The European Court of Justice on Wednesday confirmed that the agreements were illegal, but went further by ruling that customers could claim reimbursement, without any time limit, for all payments made at a rate that was judged to be too high.The decision, which cannot be appealed, means Spain’s banks could have to return 4.5 billion euros, or about $4.68 billion, to customers, according to Afi, a Spanish financial consultancy. The ruling, which came as a surprise because it went against the opinion issued earlier this year by the court’s main adviser, sent bank stocks tumbling, with some falling as much as 10 percent.

IMF chief Christine Lagarde found guilty of negligence— A French special court on Monday found International Monetary Fund Managing Director Christine Lagarde guilty of criminal “negligence” for failing to protect the French state’s financial interests in a controversial case she had to decide when she was finance minister under the presidency of Nicolas Sarkozy. However, the so-called Judicial Court of the Republic, a body made up of three professional judges and 12 members of Parliament, decided not to impose any sentence on Lagarde, and ordered that her record not bare any trace of the ruling — a decision that seemed tailored to allow her to remain in her job at the IMF. French Finance Minister Michel Sapin immediately issued a release insisting that the court’s ruling dealt with facts pre-dating Lagarde’s appointment at the IMF in July 2011, and that “the [French] government keeps trust in her ability to exert those responsibilities.” The IMF board expressed “full confidence” in Lagarde in a statement released after a a meeting convened after the verdict was handed down. The Lagarde trial stemmed from a criminal case for misuse of public funds after a decision by the French government in 2008 to arbitrate a long-standing dispute with Bernard Tapie, a businessman who had sued former state-owned bank Crédit Lyonnais over the sale of shoe-maker Adidas. In a surprise decision since attacked via corruption allegations, the three arbiters in 2008 awarded €400 million to Tapie — a decision overturned by French courts in 2015 after François Hollande’s Socialist government contested it in court. Lagarde was investigated and tried for both having formally asked for arbitration and for her decision later not to appeal.

Christine Lagarde, I.M.F. Chief, Is Found Guilty of Negligence - The International Monetary Fund threw its support behind its leader, Christine Lagarde, on Monday despite her conviction in a French court on charges of misusing public funds. With international elites and their institutions facing populist criticism amid political and social change in the United States and Europe, the 24 directors of the fund decided that this was not the time to leave the I.M.F. rudderless. Earlier on Monday, the Cour de Justice de la République, a special French court that considers cases against government officials, had found Ms. Lagarde guilty of criminal charges linked to the misuse of public funds when she was France’s finance minister nearly a decade ago. But the court did not impose a fine or sentence. In a statement, the directors of the I.M.F. said on Monday that they had considered the court’s decisions and had “full confidence in the managing director’s ability to continue to effectively carry out her duties.” Yet the verdict — and it potential to tarnish Ms. Lagarde as a leader — comes at a critical juncture for the I.M.F. Founded and largely managed by Europeans and Americans, the fund now oversees a global economy where faster-growing countries like China are pushing for more of a leadership role. Ms. Lagarde is the fourth of the last six leaders to hail from France and the difficult time the I.M.F. has had in terms of foreseeing, as well as reacting to, the European debt crisis has caused some to wonder whether the time has come to appoint a non-European head. I.M.F. doctrine, which advocates free trade and austerity for countries in financial difficulties, has also been criticized as elitist and not sufficiently in tune with the populist movements sweeping the globe today.

Christine Lagarde Will Remain as the IMF’s Chief Despite Her Conviction by a French Court — Christine Lagarde will remain head of the International Monetary Fund despite her conviction Monday of negligence in a case dating to her tenure as France’s finance minister. The IMF’s executive board quickly met after the court’s decision and expressed “full confidence” in Lagarde’s ability to carry out her duties at the head of the Washington-based international lending agency. In a statement, the board cited her “outstanding leadership” and the respect and trust she has worldwide. After a weeklong trial, France’s Court of Justice of the Republic found Lagarde guilty of one count of negligence but spared her jail time and a criminal record. The 60-year-old IMF leader had potentially faced a year of imprisonment and a fine for not seeking to block a fraudulent 2008 arbitration award to a politically connected tycoon when she was finance minister. Lagarde thanked the board for the vote of confidence “in my ability to do my job.” She said she would not appeal the French court’s decision. “I am not satisfied with it, but there’s a point in time when one must stop, turn the page and move on,” she said. Lagarde, a lawyer, became France’s first female finance minister in 2007, overseeing the country’s response to the financial crisis that rocked the global economy from 2008. She is also the first woman to head the IMF. The troubling verdict comes as the IMF is weighing its role in multiple global crises, including a bailout for Greece.

ECB Assets Hit 35% Of Eurozone GDP; Draghi Owns 9.2% Of European Corporate Bond Market --As global markets bask in the glow of the Trumpflation recovery, the ECB continues to be busy providing the actual levitating power behind what DB recently dubbed global "helicopter money", by buying copious amounts of bonds on a daily basis (at least until tomorrow when the ECB goes on brief monetization hiatus, and Italy will be on its own for the next two weeks). According to the latest weekly breakdown of what the six central banks acting on behalf of the Euro system bought in the week ending December 16, the ECB purchased at least 6 corporate bonds under its CSPP program. The latest weekly purchase lifts the number of securities held to 773; this means that the ECB now holds 9.2%, (€50.6bn) of the entire European corporate market (€549.34bn outstanding). The ECB bought bonds issued by AB InBev, Autostrade Per L’Italia, Knorr-Bremse, Snam and Uniper. 104 (~13.5%) of the 773 securities are negative yielding. Utilities remain the largest industry group with 207 securities.

Europeans Are Getting Poorer, And More Unequal -- Europeans protesting against inequality have half a point -- the gap between rich and poor isn’t closing. Ten percent of euro-area households own more than half the region’s wealth, according to a European Central Bank survey published Friday. A standard measure of inequality increased “slightly” and almost all households were worse off in 2014, the cut-off for the survey, compared with the previous poll in 2010. The findings could provide fodder for populists who have gained political traction by railing against the wealth divide, and who say the situation is worsening. The latest survey is based on data collected before the ECB embarked on a massive asset-purchase program that has been accused of depressing returns for savers and raising the value of financial assets and real estate. The median household in the euro area had a net wealth of 104,100 euros ($108,800) in 2014, about a 10th lower than in 2010, according to the survey. The richest 10 percent had 496,000 euros and the poorest 5 percent had a negative net wealth, with liabilities wiping out assets. The Gini coefficient, a statistical measure of inequality, rose to 68.5 from 68.0. A reading of 100 would signify maximum inequality. Self-employed workers were among the wealthiest, with median net assets of 256,100 euros. Outright homeowners had 226,700 euros, though that dropped to 144,300 euros with a mortgage. Renters were among the poorest at 8,900 euros. Wealth typically increased with age groups up to 65-74, before falling back.

Tsipras’s spending spree may be relief to Greeks but it won’t end crisis -- Alexis Tsipras, the Greek prime minister, likes to shake things up and, in recent days, he has reverted to form. After 16 months of faithfully toeing the line, the leader rebelled, cautiously at first and then almost jubilantly, casting off the fiscal straightjacket that has encased his government with thinly veiled glee. First came the announcement that low-income pensioners, forced to survive in tax-heavy post-crisis Greece on €800 or less a month, would receive a one-off, pre-Christmas bonus. Then came the news that Greeks living on Aegean isles which have borne the brunt of refugee flows would not be subject to a sales tax enforced at the behest of creditors keeping the debt-stricken country afloat.Finally, another announcement both antagonising and pointed: 30,000 children living in poverty-stricken areas of northern Greece will henceforth be entitled to free meals in schools.The reaction wasn’t instant but, when it came, it was delivered with force. The European Stability Mechanism, the eurozone’s financing arm, announced that short-term relief measures, agreed only a week before to ease Greece’s debt pile, would be frozen with immediate effect. It did not take long before the German finance ministry, under the unwavering stewardship of Wolfgang Schäuble, followed suit, requesting that creditor institutions assess whether Tsipras had acted in flagrant violation of Athens’ bailout commitments with his unilateral moves. The leftist insisted that the aid – €61m in supplementary support for pensions and €11.5m for the school meals – would be taken from the primary surplus his government, unexpectedly, had managed to achieve. The assistance would help “heal the wounds of crisis”. Those who live in Athens know that while the Greek crisis may ebb and flow, it never goes away.

In Ludwigshafen, Germany, a "'strongly radicalized" 12-year-old boy "of Iraqi heritage" planted a bomb at a Christmas market at the end of November.

Previously, the festive shopping tradition of Christmas markets had become "potent symbols of freedom," with Germany's Interior Minister, Thomas de Maizière, urging people to stick to unserem Leben -- "our way of life."

In Birmingham, England, the Christmas market has concrete barriers installed to deter vehicular suicide bombers. According to the head of Britain's foreign intelligence service,the magnitude of the terrorism faced by the UK is "unprecedented."

French security forces thwarted attacks planned for December 1, against Disneyland Paris and the Christmas market on the main thoroughfare of the French capital, the Champs-Elysée.

With a pro-Sharia (Islamic law) advocate now secretary of state in the Berlin regional senate, and other Muslims even refusing to shake the hand of the German President Joachim Gauck at events designed to promote integration, Germany's "way of life" is changing fast.

As the winter nights lengthen, an even darker shadow is falling across the run-up to the Christmas holidays in several European nations. Families in markets and shopping districts across the continent are buying presents in the knowledge that jihadists mean to target them. On November 21, the U.S. Department of State cited a "heightened risk of terror attacks" in an advisory statement set to expire only on February 20, 2017. "Credible information,"quotes Newsweek, prompted a warning to American travellers to "exercise caution at holiday festivals, events, and outdoor markets," given planned attacks by Al-Qaeda and ISIS.

Berlin Christmas market attack: What we know so far - A lorry ploughed into a crowded Christmas market in central Berlin on Monday evening, killing 12 people and injuring 48 others, some seriously, in what Germany's interior minister said looked like an 'attack' rather than an accident. The original driver of the truck, which appeared to have been stolen from a construction site in Poland, appears to have been shot before the attack took place, according to the interior minister for the state of Brandenburg. This is what we know so far: The suspect has been named in German media reports as a 23-year-old Pakistani asylum seeker called “Naved B”, citing German police and security sources. No official confirmation has been provided at this time. The suspect was picked up about 2 kilometers (1½ miles) away from the scene of the attack, near the Victory Column monument. Berlin's public radio station RBB-Inforadio reported that the suspect was a Pakistani citizen who entered Germany on Dec. 31, 2015, citing an unnamed security source. This partly concurred with those in other German media. News agency dpa, also citing unnamed security sources, reported that he came to Germany as a refugee in February 2016. Berlin's Tagesspiegel newspaper reported that the man was known to police for minor crimes. Berlin police declined to confirm the identification of the man as the alleged attacker, but a police spokesman said the man was being interrogated. The Welt daily reported that police raided a large shelter for asylum-seekers at Berlin's defunct Tempelhof airport overnight. Four men are understood to have been questioned, but not arrested.

"Horrified, Shocked" Merkel Says "We Must Assume This Was A Terrorist Attack" --In a move interpreted by the market as boosting the political chances of her opponents, this morning German chancellor Angela Merkel, dressed all in black for her first public comments on Monday's tragic incident, said the deadly truck attack on a Berlin Christmas market was likely an act of terrorism and pledged to punish those responsible for the attack "with the full strength of our law."In a nationally televised statement in Berlin, Merkel said she was "horrified, shaken and deeply saddened" about a truck attack that killed at least a dozen people at a Berlin Christmas market and that people across Germany were mourning after the “horrific and unimaginable” deaths and injuries sustained in the capital on Monday evening. She said she planned to tour the scene of the attack later on Tuesday.“This is a very difficult day,” Merkel said. “Like millions of people in Germany, I am horrified, shocked and deeply saddened by what happened yesterday evening on Berlin’s Breitscheidplatz.”"I want you to know that all of us, a whole country, is joined with you in mourning and sadness," Merkel told reporters in the German capital. "There is much we still do not know with sufficient certainty but we must, as things stand now, assume it was a terrorist attack," Merkel said.The main suspect in the attack is a 23-year-old Pakistani citizen who arrived in Germany a year ago and has been living in a refugee home, German media reported citing security sources. German Tagesspiegel said that he was known to the authorities as a small-time criminal. German authorities declined to provide information on the suspect’s identity, saying they would hold a news conference at 2:30 p.m. in Berlin.

Germany Releases Berlin Attack Suspect as ISIS Claims Involvement - — German officials on Tuesday released the chief suspect in the gruesome terrorist attack against a Christmas market in Berlin, launching a nationwide search for an attacker that the Islamic State claimed had acted on the terror group’s behalf. Early in the day, the authorities announced that they had the arrested a 23-year-old Pakistani asylum seeker who arrived in Germany last December as a suspect. But as the day progressed they expressed uncertainty that he was indeed the driver of the truck. By evening the federal prosecutor said the man had been released because there was no proof linking him to the crime. An examination of both the suspect and the cab of the truck turned up no evidence that he had been in it, the prosecutor said. That meant the culprit was still on the run, and far-right politicians wasted no time in pinning responsibility for the deaths on Chancellor Angela Merkel. Not only did the attack usher in the shattering realization that Germany, too, was now among the front ranks of European countries, alongside France and Belgium, that have suffered large-scale attacks in recent years.The Islamic State released a statement on Tuesday through its Amaq news agency describing the driver of the truck as “a soldier” who had answered the call to wage attacks against countries fighting the group, which is also known as ISIS, ISIL or Daesh. But it offered no other details about the driver’s identity or whether he had directly interacted with the group or was just sympathetic to it.

What the Attack in Berlin Means for Merkel - SPIEGEL : German Chancellor Angela Merkel is in crisis mode. Again. But this time, it hurts worse than before and has shaken the entire country. The attacks over the summer in Würzburg and Ansbach were merely harbingers of Monday night's bloodbath. Now, 12 people are dead and dozens more wounded after an attacker drove a semi-truck into a Christmas market in the heart of Berlin. Merkel was fully aware that something like Monday's night's attack could happen here too -- indeed, that it was almost inevitable. But that hasn't mitigated the shock. "This is a difficult day," the chancellor said. The country, she went on, is "united in deep mourning." When Merkel read her statement on Tuesday regarding the events of the previous evening, she said what she had to say in such a situation. She expressed her sympathy for the victims and their families, thanked the first-responders for their work, conveyed faith in the work of the investigators and announced that the perpetrators would be punished accordingly. And she promised: "We will find strength for the life we want to live in Germany -- free, united and open."But even as she was making her statement, the chancellor was fully aware that the correct tone, excellent police work and the steadfastness of liberal values would not be enough to contain the crisis. That helps explain why she also conveyed a political message during her five-minute appearance. It would, she said, be "particularly difficult for all of us to tolerate" a situation in which the perpetrator had come to Germany as a refugee." It would be, she continued, "particularly repulsive with respect to the many, many Germans who are engaged daily in providing assistance to refugees and with respect to the many people who really need our protection and who are doing their best to integrate."

German Anger Rises At Merkel As More Details Emerge About Berlin Truck Terrorist --Several days ago, Merkel may have walked on her own into one of the more troubling political traps as she runs for her fourth term in 2017, when she said has said "it would be particularly repulsive if a refugee, seeking protection in Germany, was the perpetrator" of the Monday Christmas market terrorist attack. Alas, despite having already been slammed by her political opponents, such as AfD's Frauke Petry, who have long claimed that any and all terrorist attacks on German soil are the direct result of Merkel's open door policies (the AfD and other anti-immigrant groups held a silent vigil outside Merkel's office in Berlin on Wednesday night to protest her refugee policies), it looks as if by even Merkel's own admission her government failed at every step to capture the Tunisian terrorism suspect, despite having had ample opportunities. As Bloomberg followed up overnight on just this issue, "critics are lambasting her for allowing hundreds of thousands of asylum-seekers to enter the country, allegedly without proper security checks." After German media published photos of Anis Amri, federal prosecutors issued a public appeal for information along with the promise of a 100,000-euro ($105,000) reward for his arrest. Within hours it emerged that the man authorities warned could be "violent and armed" had in fact been known to them for months as someone with ties to Islamic extremists who used at least six different names and three different nationalities. Even the German police union is starting to turn on Merkel: "People are rightly outraged and anxious that such a person can walk around here, keep changing his identity and the legal system can't cope with them," said Rainer Wendt, the head of a union representing German police. Although registered in the west of the country, near the Dutch border, Amri had moved around Germany regularly since February, living mostly in Berlin, said Jaeger. "Security agencies exchanged information about this person in the joint counter-terrorism center, the last time in November," said Jaeger.

Truck Attack Suspect Killed In Shootout In Milan --Anis Amri, the man believed to be behind the Christmas market in Berlin was killed in a shootout in Milan, Italy's Interior Minister Marco Minniti said at a press conference in Rome.Interior Minister Marco Minniti said during a press conference that Anis Amri, was stopped on foot by police patrols at around 3 a.m. during a routine check in the Sesto San Giovanni neighborhood. When the officers asked Mr. Amri for identification, he pulled out a gun and began to shoot. The police returned fire, killing him. "Without any doubt the person killed is Anis Amri, the man suspected in the Berlin terrorist attack," Minniti said at a press conference. Conflicting news reports previously suggested the opposite. The German Police claimed that the suspect was hiding in Berlin. On Thursday, RBB released CCTV footage showing him at a local mosque one day after the attack. The police said Amri was injured, and therefore would not risk travelling too far. German federal police had issued a rare international wanted notice for Mr. Amri—who arrived in Germany last year after time in an Italian prison—and offered a €100,000 ($104,000) reward, warning that he could be armed and dangerous. German authorities have come under criticism over accusations they failed to stop Mr. Amri, a 24-year-old asylum seeker, despite being aware of his radicalization.

Germany passes draft law to allow more video surveillance in public - (Reuters) - Germany will allow more video surveillance in public places, under a draft law passed by the cabinet on Wednesday, reflecting growing security fears in a country that has for decades been wary of police intrusion. The bill was agreed in principle by the parties in Angela Merkel's coalition last month, well before Monday's deadly truck attack on a Christmas market in Berlin that was claimed by Islamic State. Germany suffered two smaller attacks by Islamists over the summer, one on a train, the other at a music festival. Hundreds of sexual assaults last New Year's Eve also increased concerns about security on German streets. State surveillance is a sensitive issue in Germany because of extensive snooping by the Stasi secret police in Communist East Germany and by the Gestapo in the Nazi era. The new legislation would loosen data-protection restrictions for video surveillance on the streets and in places such as shopping malls, sports venues and car parks. The cabinet also agreed on allowing federal police officers to wear bodycams, a step meant to increase security for officers after a rise in violence against them in recent months. Government officials have said the country, which accepted nearly 900,000 migrants last year, many refugees from war zones in the Middle East, lies in the "crosshairs of terrorism".

The Stray Cubs Of The Caliphate: The use of child soldiers is a practice that is as old as the history of warfare itself. Since its founding, the Islamic State has embraced the tactic, but has added a modern twist with the use of social media to gather young recruits into the radical jihadist movement. And as international pressure has squeezed the group on the battlefield, it has increasingly used the children under its sway to carry out combat operations - even suicide bombings.On Dec. 16, German news outlets reported that a 12-year-old German-Iraqi boy was arrested after twice trying and failing to detonate a homemade explosive device near a Christmas market in Ludwigshafen, a city on the Rhine River across from Mannheim. A passer-by noticed an unattended backpack and alerted police, who found that it contained a glass jar filled with gunpowder. A wire protruded from a hole in the lid of the jar, suggesting that the boy was trying to detonate the gunpowder using a battery or other source of electricity. The jar bomb, covered with nails, was clearly intended to hurt or kill people. Despite its relatively simple design and small scale, had the boy managed to ignite the device in a crowd, it could have done serious damage.Authorities did not specify how they linked the boy to the device, but it is likely that surveillance camera footage helped. He apparently first tried to set off the device on Nov. 26, then tried again nine days later - indicating the backpack had been in place for some time. It appears as if police waited to publicize the incident until after they had detained the boy.Police said that the preteen had been radicalized after communicating with an unidentified member of the Islamic State over the T elegram instant messaging app. The boy reportedly expressed a desire to travel to Syria, but it appears as if his Islamic State contact persuaded him to remain in Germany to conduct an attack there. This is in keeping with the trends we have been following in Islamic State propaganda and its efforts to radicalize grassroots jihadists in the West and equip them to conduct simple attacks. In this case, the would-be attacker was a child, offering a glimpse into how the Islamic State is trying to build the next generation of jihadism.

A Greek anarchist group said it injected grocery products in Athens with chlorine and hydrochloric acid(AP) — A state food safety agency says several soft drinks and food products mostly made by multinational companies have been withdrawn from sale in greater Athens after a Greek anarchist group said it had injected packages and plastic bottles with chlorine and hydrochloric acid. The products include small bottles of Coca Cola Light and Nestle's Nestea, as well as sauces made by Unilever and milk by local producer Delta, the agency said Wednesday. A group calling itself "Green Nemesis" posted the threat on the internet Monday, saying it intended to cause financial damage to the companies. The post gave details of the methods used and included photographs of syringes being inserted into the products, with several displaying bottles of acid. The police's anti-terrorism division is involved in the investigation.

Protesters block Polish parliament — Poland’s long-running political crisis took a dramatic turn in Warsaw, with the action playing out live on television screens in prime time Friday and continuing into Saturday. Anti-government demonstrators blocked access to the parliament buildings and opposition MPs staged their own protest inside after the ruling party pushed through the annual budget in a vote without the participation of most of the opposition. Polish opposition leaders called for days of protests in Warsaw and other Polish cities, saying the government led by the Law and Justice party is violating the constitution. European Council President Donald Tusk, the former prime minister of Poland and an adversary of the current leaders, appealed “to those who have real power for respect and consideration of the people, constitutional principles and morals.” Poland’s interior minister accused the opposition of attempting a coup by occupying the parliament’s central hall. Prime Minister Beata Szydło and Jaroslaw Kaczyński, the Law and Justice leader and de facto leader of Poland, had to be evacuated from the building early Saturday morning. The crisis started when the ruling Law and Justice party pushed through rules earlier this week that limited journalists’ access to the parliament buildings. The government said the reporters’ presence made for a chaotic work environment. Polish journalists have long had the run of the parliament building, conducting interviews in the building’s main hallways and easily interacting with MPs. Their presence has also led to embarrassments, with reporters filming MPs munching sandwiches in the debating chamber, sleeping in hallways or showing up for work drunk. The opposition and most of the press were strongly opposed to the new rules, and opposition MPs blocked access to the podium in the main debating chamber of parliament on Friday.

Ireland’s love affair with Apple triggers hate at home Politico - The Irish government’s unwavering protection of Apple has infuriated the very people who stand to gain the most. The residents of Cork are souring on the tech giant — the city’s biggest employer — and fanning the flames of Euroskepticism. The European Commission slapped Apple with a €13 billion penalty for allegedly accepting a sweetheart tax deal from Ireland earlier this year. Cork residents resent Dublin’s unwavering defense of the tech giant, most recently its support of the company’s appeal Monday that claimed the EU Commission overstepped its powers. Instead of banking an amount roughly the size of the country’s annual health budget, Irish leaders recoiled at the order and defended its four-decade-long relationship with Apple. “It’s like ordering a drink and then paying someone else’s tab. A lot of people will be soured by it and then there’ll be a backlash,” said Evan Prendergast, a chef at the city’s English Market. Apple has been a lifeline for many in a city where the suicide rate is twice the national average and the economy continues to be weak, though the recovery appears to be happening faster than the rest of the country in part because of the tech industry. Apple’s workforce in the city swelled from a few hundred employees in the early 1980s to more than 4,000 today. There’ll be more work in 2018 when a new facility opens in the center of a scrappy housing estate. It’s one of three Apple locations in the city but the only one with wild horses grazing nearby. Apple paid an effective corporate tax rate of 1 percent on its European profits in 2003. That slid to 0.005 percent in 2014.Though Apple employs more than 4,000 people in a city of 125,000, many locals are appalled that the company hasn’t contributed more to the local economy through taxes. Apple paid an effective corporate tax rate of 1 percent on its European profits in 2003. That slid to 0.005 percent in 2014, vastly lower than Ireland’s corporate tax rate of 12.5 percent. “Any company that takes that sort of money has taken from hospitals and schools,”

'Europe opposed to favourable Brexit deal for Britain' as support for UK dwindles - Theresa May is being warned that European support for a favourable Brexit deal has “declined significantly”. EU opposition to Britain’s withdrawal has hardened in the six months since the referendum, claims a report by study group UK in a Changing Europe. Even Britain’s traditional allies will be unwilling to support the Prime Minister when she begins her Brexit negotiations next year. Many EU leaders believe the UK is living “on Fantasy Island” over its hope it can strike a deal – and they are preparing for a “showdown” when the talks starts, says the report. Co-author Sara Hagemann of the London School of Economics said Mrs May’s post-referendum tour of EU capitals “seems to have generated little support for the British cause”. She claimed the prospect of Brexit has “united the EU27 to a degree rarely seen before”. Dr Hagemann added: “While several of these countries first expressed the hope that a solution would be found to keep London ‘closely involved in EU affairs’, attitudes are now quite different. “The UK Government is seen as working opportunistically with only UK interests in mind and little consideration for wider European issues. “Support for the British has declined significantly even among London’s erstwhile friends.

Liam Fox wary of transitional Brexit deal - Politico - Britain needs continuity in its trading arrangements with the EU, Liam Fox said Sunday, but warned of striking a transitional Brexit deal that was too similar to membership in the bloc. The international trade secretary told the BBC’s Andrew Marr Show he wanted the EU without the U.K. to be successful and trade deals that “minimize trade barriers” but refused to be drawn on whether Britain should remain a part of the EU’s customs union. Describing himself as “instinctively a free trader,” Fox did not answer when asked if he was in favor of a transitional arrangement with the EU to tide Britain over between a formal exit in 2019 and any new trade deal with Brussels, as backed by his cabinet colleague Philip Hammond, the chancellor. “That depends” on the kind of transitional deal that can be struck, Fox said, warning that an arrangement that was too close to the status quo would go against the wishes of those who voted to leave the EU. Fox also said he “did not recognize” the figures quoted by Michel Barnier, the European Commission’s Brexit negotiator, who said the U.K. would have to pay “tens of billions” into the EU budget to cover Britain’s share of outstanding pensions liabilities, loan guarantees and spending on U.K-based projects.

The Fundamental Flaw in Muddied Brexit Thinking -- Yves Smith -Yet another set of articles in today’s Financial Times confirms what we’ve observed about the UK’s stance towards Brexit from the outset: an astonishing capacity for denial. For Americans who’ve observed the Clinton bubble and the heroic post-election attempts to keep it pumped up, the Brits are managing to do them one better. One of the sightings is on how foreign banks in the UK will make “transition arrangements” if there’s no clear post-Brexit deal likely to be in place by the presumed Brexit date of March 2019. As we noted last week, Japanese banking leaders had a tea and cookies chat with British regulators and told them they’d start moving operation out in six months if they didn’t get reassurances. That puts them behind pretty much all other foreign banks, who started getting licenses and looking into foreign office space locations pretty much as soon as they’d recovered from the immediate Brexit vote shock. Late last week, Lloyds of London was the first prominent City institution to set a schedule for relocating part of its operations to the Continent as a Brexit hedge.As we’ve stressed, the surprising thing is that anyone is acting as if this a a surprise. The EU treaty rules are very clear: the UK can’t negotiate any trade or services with the EU or bilateral deals with individual EU members as long as it is still a member of the EU. EU leaders, with a single voice, have said they are not going to be nice to the UK in the Brexit process. And more generally, as we have also stressed, Europeans are far more procedural and literal-minded about contracts and treaties than Anglo-Americans are. So the only way Britain will get to negotiate any new deal before the drop-dead date of March 2019 is if it completes its exit negotiations a meaningful amount of time before then. How likely do you think that is? Look at some of the impediments. From the Financial Times:But the first priority of Michel Barnier, chief EU negotiator, is to sort out the terms of the divorce. This means Britain must offer assurances on issues such as the rights of EU expats and paying an exit bill of up to €60bn before a deal on a “soft landing” is possible. Senior EU diplomats admit the timetable also reflects a cold calculation of interests: delaying agreement on a transition would spur companies to move some of their business to the EU to cope with the danger of a hard exit.

Business faces ‘confusion’ over post-Brexit regulation, CBI warns - Businesses in Britain face “confusion and uncertainty” over the post-Brexit regulatory regime with the UK having to maintain or copy the work of no fewer than 34 European regulators, the CBI employers’ group has warned.With sectors from life sciences to medicine to financial services under the auspices of EU watchdogs, Theresa May, prime minister, must decide whether to extricate the UK from all of those bodies after leaving the bloc.Questioned on the issue in the Commons on Monday, Mrs May said no decision had been made and the Brexit department was studying all of the regulators before making a decision: “We need to look with great care and consideration at the wide range of our relationships with Europe,” she replied.Yet staying under the auspices of any European regulator would leave Britain under the influence of the European Court of Justice — breaching a Brexit “red line” set by the prime minister herself in her speech to the Conservative party conference this autumn. “We are not leaving only to return to the jurisdiction of the European Court of Justice,” she said. Replicating work currently performed by EU agencies by setting up UK equivalents would come at a “huge cost” to taxpayers, said Pat McFadden, a senior Labour MP. “It would be sensible to approach these European agencies on a case-by-case basis. But the issue of the ECJ is a problem that the prime minister has created for herself by making this a red line.”

Brexit poll: Six months on, Brits stand by EU referendum decision - British voters would repeat their decision to leave the European Union if the "Brexit" referendum were held today, according to a new CNN/ComRes poll released Monday. Six months after the UK delivered a result that shocked much of the world, 47% of British adults say they would vote Leave, with 45% saying they would choose to Remain, even though nearly half of them expect the decision to hurt them financially. The remaining 8% of respondents said they didn't know how they would vote. On June 23, the public voted to leave the European Union by a margin of 52% to 48%, with the Leave side getting more than a million more votes than Remain. The CNN/ComRes poll suggests that, despite a slide in the value of the pound and accusations that the British government has failed to set out a clear plan for Brexit, Britons have not changed their mind since they delivered arguably the first sign of the populist wave that Donald Trump rode to victory in the US presidential election in November. "The British public have spoken and it was to leave the EU," said ComRes chairman Andrew Hawkins. "This poll should serve as a warning to Remain campaigners who want to force a second referendum that the clock cannot be turned back without risking a huge public backlash. Most of the public think the June result should stand and even some 17% of those who believe their personal finances will worsen post-Brexit would still vote to Leave," he said.

Queen’s frustration with May over Brexit secrecy - The Queen was left “disappointed” with Theresa May after the prime minister declined to share plans for Brexit during her first stay at Balmoral, The Times has learnt. Mrs May stuck to her “Brexit means Brexit” line during the visit to Scotland in September rather than giving a private briefing on how she intended to negotiate Britain’s way out of the European Union, according to a source close to the monarch. The prime minister’s failure to go beyond her public remarks during the stay meant that the Queen’s relationship with her 13th prime minister did not get off to an ideal start, the account suggests. The Queen’s disappointment echoes political criticism of Mrs May’s refusal to offer a “running commentary” on the terms of Brexit. On Tuesday she clashed with MPs on the liaison committee for refusing to give definitive answers to a string of questions. The account of the Balmoral visit emerged as the Queen travelled to Sandringham by helicopter for her Christmas break yesterday. She had delayed her travel plans by 24 hours because she and the Duke of Edinburgh were suffering from heavy colds. Mrs May’s two-day stay at Balmoral, an annual fixture for every prime minister, came two months after she took over from David Cameron and as the government was still recovering from the Brexit vote. The prime minister, who cautiously backed the Remain campaign, is unlikely to have formulated clear plans for negotiations at that stage. Even so, the Queen was hoping for more insight. The women had met for weekly audiences at Buckingham Palace but this was their first extended period of time together.

New post-Brexit landscape could squeeze Labour out, warns new report - Brexit Britain is a “new political landscape”, in which Jeremy Corbyn’s Labour party could find itself squeezed on all sides, according to a new report marking six months since the referendum result. The UK in a Changing Europe thinktank argues that the past six months have been the most tumultuous period in British politics since the second world war, with a new prime minister; leadership challenges in Labour and Ukip; the creation of two major new Whitehall departments; and Scottish independence back on the agenda, as well as the prospect of leaving the European Union. “While none of these alone is unprecedented, there has been no moment in the post-war period when so much has happened almost at once,” says Simon Usherwood. “Brexit is partly a function of, but is also partly bringing about, a new UK political landscape,” says Anand Menon, UK in a Changing Europe’s director. Menon, professor of politics at Kings College, London, highlights the rapidly shifting political mood, with MPs on both sides of the House of Commons quickly moving to support restrictions on immigration, as they interpret the referendum result, and subsequent polling, as a clear rejection of the EU’s policy of free movement. “It has been striking to see how former remainers among Conservative MPs have swung behind the prospect of even a hard Brexit,” he says in his contribution to the report.

Losing single market could devastate Scotland's prosperity, Nicola Sturgeon warns | The Independent: 'Being part of the European Single Market is vital for Scotland's future economic wellbeing' First Minister says. Losing Scotland's place in the single market would be "potentially devastating" to the country's long-term prosperity, the First Minister has said. Nicola Sturgeon said that being part of the European Single Market is "vital for Scotland's future economic wellbeing" and warned against a hard Brexit. She was speaking ahead of the publication of the Scottish Government's paper, "Scotland's Place in Europe" in Edinburgh on Tuesday. The paper will propose that Britain should remain in the free trade bloc even though the UK has voted for Brexit. Nicola Sturgeon: Scotland look to intervene in Brexit legal case The document will also set out how Scotland could remain in the single market without the rest of the UK and propose a "substantial transfer of new powers to Holyrood" after the country leaves the European Union (EU).

UK MPs unite to push for greater transparency from tax havens -- The UK’s overseas territories face renewed pressure to abandon corporate secrecy after 80 MPs joined forces to demand greater financial transparency from offshore havens.The cross-party group is backing an amendment to the government’s criminal finances bill on Tuesday that would force Britain’s 14 overseas territories to introduce public registers revealing the true owners of locally registered companies.The move is expected to face fierce opposition from the handful of the UK’s overseas territories – including the British Virgin Islands, Turks and Caicos Islands and Anguilla – that have become some of the world’s most active secrecy havens. Earlier this year, the Panama Papers scandal laid bare how offshore corporate secrecy regularly attracts illicit money flows linked to terrorism, corruption, money laundering, tax evasion, drugs and fraud. Some estimates have suggested as much as $32tn (£26tn) of the world’s wealth has been hidden offshore. The MPs’ proposal, which is being tabled on the last day before parliament breaks for Christmas, would effectively give all overseas territories until 2020 to introduce public registers. Earlier this year, many overseas territories refused to buckle under intense pressure from then UK prime minister David Cameron, who called for them to introduce registers.

UK debt soars to £1.7TRILLION as borrowing jumps AGAIN in November - Money owed as a share of the economy hit 84.5 per cent, as the state took on another £12.6billion last month, according to the Office for National Statics (ONS). The country is in the red by an extra £58.6bn compared to November 2015, with borrowing falling only £0.6bn last month compared to the same period last year. It comes despite growing tax income, with receipts up 3.6 per cent last month, as the economy continues to boom following the Brexit vote. Scott Bowman, uk economist at Capital Economic said: "Looking through some of the monthly volatility, receipts growth has been on a slight upward trend since May – adding to the evidence that the economy has held up well following the vote to leave the EU. "Meanwhile, an acceleration in annual VAT receipts growth from 3.7 per cent to 4.4 per cent reinforces the recent surveys that imply that consumer spending has been fairly strong at the start of the festive season."However, in the financial year to date, running from April November, the Government borrowed £59.5bn - down £7.7bn from the same period last year - and the lowest level since the financial crisis. A Treasury spokesperson: “The government has made significant progress in bringing the public finances under control, but our debt and deficit remain too high.

Wave of UK strikes could bring chaos to railways, airports and post offices - A wave of industrial action over pay and safety standards is expected to bring widespread disruption to the railways, airports and post offices over the Christmas period. More than 3,000 Post Office workers were taking industrial action on Monday in a dispute over proposed branch closures and pay. On Southern rail staff are continuing their dispute with the train operator over the role of guards, bringing disruption to about 300,000 passengers.Meanwhile, British Airways and Virgin Atlantic face industrial action over Christmas. Talks aimed at averting strikes by British Airways cabin crew over Christmas will be held at Acas on Monday, but unless a deal is reached, members of Unite are due to strike on Christmas Day and Boxing Day in a dispute over pay. Conservative MPs have criticised the strikes as “politically motivated”, calling for tougher laws to make it harder for staff to take action. But Frances O’Grady, the general secretary of the TUC, dismissed the suggestion, saying the UK already had some of the most draconian anti-union laws in the western world. Speaking on BBC Radio 4’s Today programme, she added: “Some MPs seem to be calling for even more draconian laws against trade unions ... most people agree striking is the last resort; we don’t want to do that, we want a fair agreement but the right to strike is a fundamental British liberty that the vast majority of the public support.” O’Grady said working people in the UK were worse off than before the financial crisis and they were demanding a fair deal from their employers.

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